E/XR  L 
PEADE 

OBERN 


LIBRARY 

THE  UNIVERSITY 
OF  CALIFORNIA 

SANTA  BARBARA 

PRESENTED  BY 

GEORGE   OBERN 


BUSINESS  ADMINISTRATION 

A  Library  of  Business  Principles,  Practice,  and  Experience 

Edilor-in-Chiej 
WALTER  D.  MOODY 

Former  General  Manager,  Chicago  Association  of  Commerce 

Managing  Director,  Chicago  Plan  Commission 

Author,  "Men  Who  Sell  Things" 

Managing  Editor 

WILLIAM  BETHKE,  M.A. 

Department  of  Business  Administration 
LaSalle  Extension  Universit)' 


LaSalle  Extension  University 


BUSINESS     ADMINISTRATION 

Being  an  organized  presentation  of  the  prob- 
lems of  business  management  prepared  by  an 
unusual  group  of  successful  and  authoritative 

Organizers,  Educators,  and  Business  Experts 


lR%aNG  R.  Allen 

Sales  Counselor,  Chicago 

William  Bethke,  M.A. 

Educational  Director 
LaSalle  Extension  University 

Ernest  Ludlow  Bogart,  Ph.D. 

Professor  of  Economics 
University  of  Illinois 

Theodore  E.  Burton,  LL.D. 

Former  United  Stales  Senator 

Harry  J.  Carpenter 

National  Bank  of  Commerce 
New  York 

J.   W.   COBEY 

Formerly   Traffic  Manager,   National  Cash 
Register  Company 

E.  F.  Dahm,  B.A. 

LaSalle  Extension  University 
Formerly  Assistant  Director 
Retail  Research  Association 

Hugo  Diemer,  M.E. 

LaSalle  Extension  University 
Formerly  Personnel  Superintendent 
Winchester  Repeating  Ar7ns  Company 

Coleman  duPont 

Chairman,  Equitable  Office  Building 
Corporatio7i,  New  York 

B.  C.  Forbes 

Business  and  Financial  Writer 

Louis  Guenther 

Editor,  "Financial  World" 

Arthur  B.  Hall,  A.B. 

Hall  &  Ellis,  Real  Estate,  Chicago 

Fred  L.  Ham,  M.B.A. 

Director,  Department  of  Business 
Administration,  LaSalle  Extension 
University 

F.  C.  Henderschott 

New  York  Edison  Company 

Samuel  D.  Hirschl,  S.B.,  J.D. 
Harry  Arthur  Hope,  M.C.S. 

Organization  Counsel 

Federal  Reserve  Bank,  New  York 

B.  Olney  Hough 

Editor,  "American  Exporter" 

E.  H.  Kastor 

//.  W.  Kastor  b'  Sons  Advertising 
Company,  Chicago 

Percy  H.  Johnston 

President,  Chemical  National  Bank 
New  York 


Edwin  Herbert  Lewis,  Ph.D.,  LL.D. 

Lewis  Institute,  Chicago 

Walter  D.  Moody 

Late  Managing  Director, 
Chicago  Plan  Commission 

Hugo  Mlnsterberg,  Ph.D.,  LL.D. 
Paul  H.  Nystrom,  Ph.D. 

Director,  Retail  Research  Association 
New  York 

C.  C.  Parsons 

Secretary-Treasurer,    Collateral    Mortgage 
Corporation  of  New  York 

Joseph  M.  Regan 

Editor,  "Bankers'  Monthly" 

Alexander  H.  Revell 

President,  Alexander  H.  Revell  &• 
Company,  Chicago 

George  E.  Roberts 

Vice  President,  National  City  Bank 
New  York 

Maurice   H.    Robinson,  Ph.D. 

Professor  of  Industry, 
University  of  Illinois 

Stanley  H.  Rose 

Foreign  Sales  Manager, 
Barber  Asphalt  Company 

Charles  M.  Schwab 

Bethlehem  Steel  Corporation 

I.  Leo  Sharfman 

Professor  of  Political  Economy 
University  of  Michigan 

Edward  M.  Skinner 

General  Manager,  Wilson  Brothers, 
Chicago 

J.  F.  Strombeck 

President,  Strombeck-Bccker  Ma7iufaciuring 
Company,  Moline,  Illinois 

Theodore  N.  Vail 

Late  President,  American  Telephone 
and  Telegraph  Company 

F.  E.  Weakly 

General  Office  Manager,  Halsey,  Stuart 
b'  Company 

R.  S.  White 

Collection  Manager,  American  Steel  and 
Wire  Company,  Chicago 

H.  Parker  Willis,  Ph.D. 

Professor  of  Banking 
Columbia  University 

John  North  Willys 

President,  Willys-Overland  Company 

Richard  P.  Wilson 

Batavia  Rubber  Company 


INDUSTRIAL  ORGANIZATION  AND 
MANAGEMENT 


HUGO  DIEMER,  B.A.,  M.E. 

Professor  of  Industrial  Engineering,  Pennsylvania  State  College; 

Consulting  Industrial  Engineer;  Author  of  Factory 

Organization  and  Administration 


La  Salle  Extension  University 
-     C  h  i  c  a  g^  o 

1922 


Copyright,  1918 
LaSalle  Extension  University 


CONTENTS 


I.     The  Principles  op  Business  Organization 

Organization,  Administration,  and  Control...  1 

Line  Control   2 

Line-and-Staff  Control 3 

Functional  Control 4 

Committee  Control  5 

Types  of  Control  Compared 7 

Specialization     8 

Specialization     and     Fuuctionalization     Con- 
trasted       9 

Combination    10 

Classes  of  Industry 11 

System 11 

Efficienc}^    12 

Correct  Use  of  Technical  Terms 13 

Developing  Organizing  Ability 14 

II.     Types  of  Organization 

Charts  of  Organization 16 

Charting  Line   Control 16 

Charting  Line-and-Staff  Control 18 

Charting  Functional  Control 18 

Charting  Committee  Control 19 

Chart    Illustrating    Departmental    Specializa- 
tion      20 

"Three-Column"  Type  of  Industrial  Organiza- 
tion      22 

The  Seven  M's 23 

Charting  Progress  of  Orders 23 

Indicating  Paths  of  Material  on  Charts 27 

Charting  Responsibilities  of  Department  Heads  28 

III.     Locating  an  Industry 

General  Considerations 31 

Materials    32 

Power    '^^ 

V 


vi  Contents 

Climate  34 

Transportation  Facilities   34 

Labor  Supply   36 

Special  Inducements  Offered 37 

Money  Market  38 

Sales  Markets    38 

Local  Site 39 

Local   Labor   Market -.  .  .  39 

Local  Transportation  Facilities 39 

Nearness  to  Local  Trade  Centers 40 

Fire  Prevention,  Water  Supply,  and  Sanita- 
tion      40 

Industrial  Surveys ■. 40 

IV,     Manufacturing  Plants  and  Equipment 

Importance  of  Arrangement  and  Equipment.  .  43 
Principal  Factors  to  be  Considered  in  Plant 

Lay-out 43 

Process-Mapping     44 

Routing  Individual  Parts  or  Classes  of  Material  47 
Selection  and  Arrangement  of  Machinery  and 

Fixtures 49 

Departmental  Arrangement  by  Processes 51 

Power-Generation  and  Transmitting-Apparatus  51 
Heating,  Ventilating,   Humidifying,  and  Air- 
Washing  Apparatus 52 

Advantages  of  Hot- Blast  System 53 

Light  54 

Wash  and  Locker  Rooms 55 

Transportation    55 

Store  Rooms    55 

Receiving  and  Shipping 56 

Tool  Rooms   56 

Foremen 's  Offices  56 

Planning-Department  Fixtures  57 

Inspectors'  Quarters   57 

Fire-Prevention,  Safety,  and  Welfare  Arrange- 
ments    57 

Drafting  and  Designing  Space 58 

Commercial  Offices  58 

Final  Arrangement   58 

V.    Buying 

Qualifications  of  a  Purchasing  Agent 61 

Knowledge  of  the  Materials 62 


Contents  vii 

Data  Kegarding  Materials 62 

Knowledge  of  Markets 64 

Records  of  Former  Purchases 66 

Record  of  Quotations 67 

The  Human  Element  in  Buying 67 

Requisitions  on  Purchasing  Department 68 

Filing  Purchase-Order  Copies 70 

Following  Up  Purchase  Orders 71 

Financial  Problems  in  Buying 72 

Relation  of  Receiving,  Stores,  and  Purchasing 

Departments    73 

VI.     Receiving,  Storing,  and  Recording  IMaterials 

Determination  of  Material  Requirements 76 

Financial  Importance  of  Materials 77 

Stores  Accounting    77 

]\Iaterial  Specifications    78 

Relation  of  Material  Records  to  Various  De- 
partments   . . .  80 

Perpetual  Inventories  of  Stores 83 

Making  Entries  in  the  Stores  Ledger 86 

Physical  Features  of  Store  Rooms 89 

VII.     Planning 

Planning  of  Industrial  Activities  in  Advance .  .     93 

Planning  as  to  Finances 94 

Planning  as  to  Sales 94 

Planning  as  to  Production 96 

Planning  Department  as  Designed  by  F.  W. 

Taylor 97 

Modified  Taylor  Planning  Department 98 

Separation  of  Planning  from  Routine  Activities     99 

Planning  Work  in  the  Shops 100 

Planning  as  to  Employment 107 

Does  Planning  Mean  Additional  Non-Produc- 

tive  Labor?    108 

VIII.     The  Determination  of  Costs 

Inaccurate  or  Inadequate  Costs 112 

Need  of  Accurate  Costs 113 

Cost  as  a  Basis  of  Selling  Prices 114 

Wastes  Disclosed  by  a  Cost  System 115 

Lower  Production  Costs  Necessary 115 

Cost  of  Repair  and  Detailed  Parts 117 

Correlation  of  Costs  to  Other  Manufacturing 

Data    118 


viii  Contents 

Comparative  Costs  118 

Classification  of  Costs 119 

Elements  of  Cost 119 

Correlation  of  Cost  Records  and  General  Ac- 
counts        123 

Manufacturing  Expense   126 

Difference  Between   INIanufaeturing   Cost  and 

Selling  Cost  128 


IX.     Methods  of  Collectincj  IMaterial  and  Labor  Costs 

Sources  of  Cost  Data 131 

Assembling  the  Cost  Data 142 

Comparative  Costs   145 

Periodic  Reports  by  the  Cost  Department 1,47 

Supplementary  Reports    148 

X.     The  Distribution  of  the  Expense  Burden 

The  General  Divisions  of  Expense 150 

Allotment  by  Product 152 

Allotment  by  Labor 153 

Local  and  General  Burden  Rates 156 

Allotment  by  Machines 159 

The  Standing  Expense  Orders 161 

Typical  Standing  Orders  in  the  Administrative- 
Expense  Group   161 

Typical  Standing  Orders  in  the  Manufacturing- 
Expense  Group  162 

Typical   Standing   Orders   in   the   Selling-Ex- 
pense Group    162 

Co-operation  Avith  Accounting  Department ....  163 

XI.     Standardization 

Importance  of  Standards 165 

Advantages  of  Standardization 165 

Disadvantages  of  Standardization 166 

The  Field  of  Standardization 167 

Standardization  in  the  Administrative  Division  167 

Standardization  in  the  Production  Division.  .  .  169 

Organization  of  the  Production  Division 169 

Standardization  of  Product 169 

Standards  in  the  Drawing  Department 170 

Standards  in  the  Pattern  Department 173 

Standards  in  Materials 174 

Methods  of  Planning  and  Supervising 174 


Contents  ix 

Standards  in  Processing 174 

Standards  Relating  to  Tools 175 

Time  Standards  for  ^Machine  Operations 175 

Time  Standards  for  Handling  Operations 178 

Efficiency  Standards    178 

Wage  Standards 179 

Standards  of  Testing  Product 180 

Standardization  in  the  Selling  Division 181 

Permanence  of  Standards 181 

Essentials  of  Good  Standards 182 

XII.     Scientific  Management 

Broad  and  Narrow  Interpretation 184 

Can  a  Science  Have  Definite  Aims? 185 

The  Application  of  Scientific  Management. .  .  .   186 

The  Securing  of  Data 188 

Applying  the  Data  and  Standards 189 

Making   Further   Investigations 189 

Securing  the  ^laximum  of  Prosperity'  for  all 

Concerned    190 

Taylor's  Principles  of  Scientific  Management  190 
Conclusions  of  the  American   Society  of  Me- 
chanical   Engineers    191 

Obstacles  in  the  Way  of  Scientific  Management  191 

Objections  by  Proprietors 192 

Objections  by  Employes 193 

Xm.     Time  and  jMotion  Studies 

Definitions    197 

Standard  Elemental  Operations  and  Times...  197 

Method  of  Timing  Observations 199 

Moving  Pictures  as  an  Aid  to  Time  Study.  . .  .  199 

Mapping  Motions    201 

Qualifications  of  Time-Study  Observer 203 

Preparation  of  the  Instruction  Card 204 

Doing  the  Work  According  to  Instructions.  .  .  .  205 

Allowances  for  Exceptional  Conditions 207 

Time  Study  Does  Not  Mean  Driving 208 

Inspection    209 

The  Expense  of  Time  Studies 210 

Desirability  of  Publishing  Time-Study  Data. . .  210 

XTV.    "Wage  Systems 

General  Classification  of  Wage  Systems 212 

Time  Work    '. 212 


X  Contents 

Ordinary   Piece    Rate 214 

Differential  Piece  Rate 216 

Collective    Contract   Work 219 

Time  Work  with  Efficiency  Records 220 

Halsey  Premium  System 221 

Rowan  Premium   System 224 

Gantt  Bonus  System 226 

Bonus  System  on  Individual  Jobs 227 

Diemer  Combined  Bonus  and  Premium  System  229 

Efficiency   System    230 

Selecting  and  Introducing  Wage  Systems 231 

XV.     Welfare  and  Betterment  Work 

Aims  of  Welfare  and  Betterment  Work 236 

Activities  Included  Under  Welfare  and  Better- 
ment Work    237 

Organization  for  Welfare  and  Betterment  Work  237 

Safety,  Accident  and  Fire  Prevention 239 

Educational  Activities 243 

Rest  Periods  and  Luncheons 244 

Social  Activities   245 

Medical  and  Hygienic  Activities 246 

Physical  Training 246 

Suggestion    System    247 

Benefit  Societies  248 

XVI.     Employment  Problems 

Desirable  Qualifications  of  Employes 252 

School  and  Education  Record 265 

Family  History 265 

Industrial  History    265 

Housing  and  Thrift  Data 265 

Co-operative  Employment  Agencies 266 

Is  there  an  All-round  ]\lan  ? 266 

Union  or  Non-union  Men 266 

Organized  Labor  and  Scientific  Management. .  268 
Importance  of  Employment  Bureau 269 

XVII.    Reports  to  Executives 

Duties  of  the  IModern  Industrial  Executive.  .  .  271 

Selling-Division  Reports   273 

Predetermining  Each  Sales  Territory's  Earn- 
ings      274 

Reports  of  Actual  Sales  Made 274 

Manufacturing-Division  Reports 275 


Contents  xi 

Detailed  Parts  Manufacturing  Program 276 

Work  for  Each  Machine  and  Production  Center  277 

Classified  Reports  of  Materials  and  Supplies. . .  277 

Pay-Roll  Estimates    277 

Comparison  of  Probable   Money   Income   and 

Expenditure 278 

Cost-Department  Reports  278 

Detailed   Expense   Budget 279 

Reports  of  Suggestions 280 

Profit  and  Loss  Statement 280 

Physical  or  Non-financial  Reports 281 


LIST  OF  FORMS  AND  ILLUSTRATIONS 


Fig.    1.     Chart  Illustrating  Line  Control 17 

Fig.    2.     Chart  Illustrating  Line-and-Staff  Control 17 

Fig.    3.     Chart  Illustrating  Functional  Control 18 

Fig.   4.     Chart  Illustrating  Committee  Control 19 

Fig.    5.     Chart  Illustrating  Departmental  Specialization  by 

Processes    21 

Fig.    6.     Chart  Illustrating  Going's  Principle  of  the  "Seven 

M's"    22 

Fig.    7.     Chart  Illustrating  Progress  of  an  Order  Through 

Departments 24 

Fig.    8.     Chart    Showing    Origin    and    Progress    of    Shop 

Orders  and  3.1aterial 26 

Fig.    9.     Chart  Showing  to  Whom  oMen  in  Departments  are 

Responsible    28 

Fig.  10.     Lay-out  of  a  Flour  Mill 45 

Fig.  11.     Lay-out  of  an  Ore  Mill 46 

Fig.  12.     Lay-out  of  a  Structural  Steel  Plant 47 

Fig.  13.     Lay-out  of  a  Locomotive  Shop 48 

Fig.  14.     Typical  Routing  Card 49 

Fig.  15.     Departmental  Lay-out  of  a  Machine  Shop 50 

Fig.  16.  Final  Lay-out  of  Ground  Floor  for  a  Manufactur- 
ing Plant   58 

Fig.  17.     Index  for  Information  and  Catalogue  File 63 

Fig.  18.     Index  for  Purchasing  Department's  Information 

and  Catalogue  File 64 

Fig.  19.     Materials-Purchased  Record 66 

Fig.  20.     Request  for  Requisition 68 

Fig.  21.     Purchase  Order 69 

Fig.  22.     Department  Requisition   70 

Fig.  23.     Report  of  Accounts  Payable 72 

Fig.  24.     Purchasing  Agent's  Report  of  Invoices  Approved  73 

Fig.  25.     Material  List 79 

Fig.  26.     Chart  Illustrating  Relation  of  Material  Records  to 

Various  Departments 81 

Fig.  27.     A  Typical  Perpetual  Inventory  Sheet 84 

Fig.  28,     Materials-Received  Report   87 

xiii 


xiv  List  of  Fornix  and  Illustrations 

Fig.  29.  Credit  Memorandum   88 

Fig.  30.  Withdrawal  Order  for  Materials  Issued 89 

Fig.  31.  Memorandum  of  Materials  Shipped 90 

Fig.  32.  Chart  Illustrating  Planning 95 

Fig.  33.  Detail  or  Individual-Piece  Route  Sheet 102 

Fig.  34.  Record  for  Keeping  Balance  of  Work  Ahead ....  104 

Fig.  35.  Record  of  Date  at  Which  Each  Component  Part 

is  Due 104 

Fig.  36.  Shop  Bulletin  Board 104 

Fig.  37.  Planning  Department's  Office  Bulletin  Board 105 

Fig.  38.  Tracing  Record 106 

Fig.  39.  Chart  Illustrating  Costs 120 

Fig.  40.  Chart  Illustrating  Sources  of  Cost  Data 132 

Fig.  41.  Typical  Copy  of  Sales  Order 133 

Fig.  42.  Front  of  Tag  Type  of  Production  Order 134 

Fig.  43.  Reverse  of  Tag  Type  of  Production  Order 135 

Fig.  44.  Receiving-Department    Report    of   Materials    Re- 
ceived      137 

Fig.  45.  Clock  Stamp  Time  Card 138 

Fig.  46.  Clock  Stamp  Job  Card 140 

Fig.  47.  Stiff  JNIanila  Envelope  for  Material  Slips  and  Job 

Time  Cards   142 

Fig.  48.  Typical  Traditional  Cost  Posting  Card 143 

Fig.  49.  Form  for  Comparing  Total   Costs  of  Assembled 

Product     144 

Fig.  50.  Comparative  Individual-Part  Cost  Record 146 

Fig.  51.  Comparative  Operative  Cost  Record 146 

Fig.  52.  Standard  Title-Plate,  etc 171 

Fig.  53.  Standard  Cross-Hatchings   172 

Fig.  54.  Standards  as  to  Forging-Tools 176 

Fig.  55.  Standard  Symbols  for  Classification  of  Tools 177 

Fig.  56.  Tool  List   198 

Fig.  57.  Time-Study  Observation 198 

Fig.  58.  Observation  Sheet  and  Stop-Watch 200 

Fig.  59.  "Before  and  After  Taking" 201 

Fig.  60.  The  Gilbreth  Clock 202 

Fig.  61.  Time  and  ]\Iotion  Observations  by  the  Moving-Pic- 
ture  Camera    202 

Fig.  62.  Moving-Picture  Film  202 

Fig.  63.  Rack  from  which  the  Workman  Assembles  Parts.  .  203 

Fig.  64.  Taking  Time-Study  Obsen^ations 203 

Fig.  65.  Drawing  of  Piece  on  which  Time-Study  Data  Were 

Taken    204 

Fig.  66.  Instruction  Card  for  the  Piece  Shown  in  Fig.  65. .  206 


List  of  Forms  and  Illustrations  xv 

Fig.  67.     Chart  Illustrating  Pay  under  Ordinary  Piece  Rate  215 
Fig.  68.     Chart  Illustrating  Pay  under  Differential  Piece 

Rate     218 

Fig.  69.     Chart  Illustrating  Pay  under  the  Halsey  Premium 

System    222 

Fig.  70.     Chart  Illustrating  Pay  under  the  Rowan  System  226 
Fig,  71.     Chart   Illustrating  Pay  under  the   Gantt  Bonus 

System    227 

Fig.  72.     Chart    Illustrating    Pay    on    the    Individual-Job 

Bonus  System   228 

Fig.  73.     Chart  Illustrating  Pay  under  the  Diemer  System  230 
Fig.  74.     Chart  Illustrating  Pay  under  the  Emerson  Effi- 
ciency System   232 

Fig.  75.     Tabulation   Showing  the   Method   of   Calculating 

Wage   Data    233 

Fig.  76.     Transfer  Table,  ]\Iotor  Gears  Uncovered 242 

Fig.  77.     Transfer  Table,  I\Iotor  Gears  Covered 242 

Fig.  78.     Method  of  Guarding  a  IMill  Motor. 242 

Fig.  79.     Pig-iron  Trestle  Shield  to  Prevent  Injuries 242 

Fig.  80.     Gardens — American   Bridge    Company 242 

Fig.  81.     Bird's-eye  View  of  Town  of  Marguerite 242 

Fig.  82.     Group  of  Slavish  Laborers  Who  are  Stockholders  242 

Fig.  83.     Swimming  Pool — Leisonring  No.  1  Mines 242 

Fig.  84.     Playgrounds,  National  Tube  Company 242 

Fig.  85.     Playgrounds,  National  Tube  Company 242 

Fig.  86.     Photograph  Showing  Column  Ventilators  at  the 

Ford  Motor  Works 242 

Fig.  87.     Emergency  Hospital,  Continental  Works 242 

Fig.  88.     Sales  Manager's  Report  of  Sales  and  Demand 272 

Fig.  89.     Shipments  of  Locomotives,  1914 276 

Fig.  90.     Money  Income  and  Outlay  Chart 279 

Fig.  91.     Weekly  Cupola  Report 282 


INDUSTRIAL  ORGANIZATION  AND 
MANAGEMENT 

CHAPTER  I 
the  principles  of  business  organization 

Organization,  Administeation,  and  Control 

Organization  is  the  development  of  an  organic  struc- 
ture, that  is,  a  structure  composed  of  organs.  The  term 
"organ"  signifies  a  part  which  is  a  natural  division  in 
an  animal  or  plant,  capable  of  performing  some  special 
action  essential  to  the  life  of  the  whole.  The  term 
' '  industrial  plant "  is  a  figure  of  speech  which  illustrates 
the  analogy  between  industrial  activity  and  natural  life. 

An  organ  in  a  mechanical  contrivance  is  a  component 
part  performing  an  essential  office  in  the  work  of  the 
mechanism.  In  the  steam-engine,  for  example,  the 
cylinders,  valves,  cranks,  etc.,  are  organs.  To  develop 
an  organic  structure,  therefore,  we  must  arrange  the  parts 
so  that  each  has  a  natural  and  specific  function,  office,  and 
relation.  A  business  organizer  pursues  the  methods  of 
the  scientist  in  gaining  an  insight  into  the  nature  of  the 
whole,  basing  his  work  upon  a  careful  examination  of  all 
the  parts  and  their  interrelations. 

Organization  determines  the  scope  and  limits  of  activity 
of  each  individual  or  group  of  individuals  in  a  business 
or  industrial  undertaking,  together  with  their  relations 
and  connections  with  one  another.     Organization  is  the 

1 


2  Organization  and  Management 

chief  source  of  power  of  large  corporations.  It  means 
that  the  experience,  technical  skill,  tact,  and  abilities  of 
all  kinds  of  carefully  selected  men  are  directed  in  such  a 
manner  as  to  be  most  effective  in  the  interests  of  the 
business. 

The  act  of  managing  or  directing  an  organization  is 
designated  by  the  term  ''administration."  The  term  is 
sjTaonjTnous  with  "management."  By  management  we 
mean  the  carrying-out  or  executing  of  the  laws  of  the 
organization.  Organization  has  already  been  seen  to  be 
based  on  the  methods  of  science.  On  the  other  hand, 
management  comes  more  nearly  in  the  field  of  art.  Man- 
agement requires  guiding  by  careful  or  delicate  treatment. 
It  involves  a  knowledge  of  all  the  human  characteristics, 
prejudices,  and  affiliations  of  the  individuals  and  groups 
of  individuals  composing  the  organization,  together  with 
the  power  successfully  to  cope  with  these  characteristics, 
prejudices,  and  affiliations.  It  brings  all  of  the  individuals 
into  harmonious  relations  and  subservience  to  the  laws 
of  the  organization. 

The  term  "control"  is  used  to  designate  the  methods 
by  which  the  executive  or  managing  heads  of  a  business 
carry  out  their  authority  to  regulate  its  affairs  in  accord- 
ance with  the  laws  of  the  organization.  Control  may  be 
of  the  following  types:  (1)  line  control;  (2)  line-and-staff 
control;  (3)  functional  control;  (4)  committee  control. 

Line  Conteol 

The  term  "line"  in  military  usage  means  a  row  of  men 
abreast  of  one  another.  In  military  line  control  the  plan 
of  campaign  is  not  disclosed  by  the  commander-in-chief 
to  the  line  officers.  Previous  to  the  development  of  the 
modern  system  of  staff  officers,  the  commander-in-chief 
planned  out  which  way  the  divisions  should  march,  where 


Principles  of  Organization  3 

they  should  seek  shelter,  how  they  should  be  provisioned, 
where  bridges  and  roads  were  to  be  built,  etc.,  and  he 
gave  his  orders  at  the  proper  time  to  the  line  officer  next 
below  him  in  rank,  who  in  turn  passed  the  orders  to  other 
officers  down  the  line. 

In  line  control  as  applied  to  industry,  each  foreman  is 
responsible  for  everything  in  his  own  department  or  shop. 
He  must  see  that  the  proper  sequence  of  work  is  observed, 
that  he  does  not  run  out  of  orders,  that  he  keeps  up  with 
the  work  in  hand,  that  he  is  provided  with  the  necessary 
materials,  supplies,  and  tools,  that  he  is  not  extravag'ant 
with  these,  that  the  work  is  correctly  done,  that  it  does 
not  cost  too  much,  that  his  men  are  satisfied,  and  that  his 
machines  are  in  good  working  order. 

Line  control  may  be  further  illustrated  by  the  divisional 
organization  employed  in  many  railroad  systems.  In 
divisional  control  the  division  superintendent  is  given 
absolute  authority  over  the  methods  of  his  division  in 
all  lines,  being  held  responsible  only  for  results.  This 
type  of  line  control  is  also  found  in  some  large  manufac- 
turing plants.  For  instance,  in  an  agricultural  machinery 
manufacturing  plant  divisional  control  would  give  to  the 
respective  shop  superintendents  absolute  authority  as  to 
methods,  wages,  and  manufacturing  policies,  so  that  the 
superintendent  of  the  mower  department  might  use 
methods  entirely  different  from  those  of  the  superin- 
tendent of  the  thrashing-machine  department,  and  the 
superintendent  of  the  gray-iron  foundry  might  use 
methods  of  handling  labor  quite  other  than  those  of  the 
superintendent  of  the  malleable-iron  foundry. 

LiNE-AND- Staff  Conteol 

Caesar  and  Napoleon  employed  line  control.  It  was 
von  Moltke  who  developed  the  staff  principle.    He  ap- 


4  Organization  and  Management 

pointed  special  ofificers  to  furnish  expert  guidance,  each 
staff  officer  ha\'ing  a  field  in  which  he  was  specially  trained 
and  expert.  Thus,  one  member  of  the  staff  supervised 
engineering  features,  another  the  commissary,  etc.  As 
industry  began  to  avail  itself  of  the  expert  knowledge 
of  men  with  special  training  and  ability — for  instance,  in 
the  fields  of  engineering  and  chemistry — we  find  business 
owners  and  managers  employing  staff  specialists  in  these 
subjects.  In  military  line-and-staff  control  and  in  its 
industrial  analogy  we  find  the  staff  officers  and  their 
assistants  working  out  special  problems  and  making  their 
recommendations  to  the  chief,  who  issues  orders  molded 
by  the  expert  advice  of  his  staff,  through  his  line  officers. 

Functional  Control 

This  type  of  control  does  away  with  all  of  the  com- 
missioned-officer type  of  foremen  and  assistant  superin- 
tendents, and  retains  only  one  head  at  the  top  and  gang 
bosses  in  the  line.  The  staff  control  is  extended  to  cover 
direct  control  of  routine  work  instead  of  through  the 
medium'  of  expert  advice  to  the  chief  line  officials.  In 
other  words,  the  functional  experts  apply  their  expert 
knowledge  not  only  to  the  formulating  of  rules,  but  to  the 
regular  course  of  business  as  it  occurs  each  day,  and 
each  functional  expert  or  boss  deals  directly  with  the  men 
in  the  ranks,  either  personally  or  through  the  medium 
of  expert  instructors. 

Thus,  we  may  have  functional  experts  assigned  to  the 
tasks  of  answering  the  following  questions  with  regard 
to  the  regular  work  of  a  manufacturing  establishment: 
"What  work  is  to  be  done  next?"  "Wliere  shall  the 
work  be  done?"  "How  shall  it  be  done?"  The  first 
question  is  answered  by  a  functional  head  with  a  com- 
petent force  of  assistants  who  determine  what  shall  be 


Principles  of  Organization  5 

the  order  of  each  day's  work  for  each  department  and 
each  man,  and  work  out  the  system  which  will  assign, 
at  least  a  day  in  advance,  each  man's  tasks  for  the  follow- 
ing day.  Such  a  functional  force  is  sometimes  designated 
by  the  term  ''bureau"  to  distinguish  it  from  one  of  the 
processing  departments  of  an  industry.  The  name 
'*order-of-work  bureau"  or  "scheduling  bureau"  or 
'  *  bulletining  bureau ' '  may  be  applied  to  such  a  functional 
division. 

The  question  as  to  where  the  work  shall  be  done  can 
be  answered  by  another  functional  bureau  which  knows 
all  about  the  equipment  and  processes  as  well  as  the 
adaptability  of  men  and  tools  to  various  kinds  of  work. 
Such  a  functional  division  may  be  designated  as  a  "  rout- 
ing bureau." 

The  question  as  to  how  the  work  shall  be  done  is  made 
the  subject  of  study  by  the  men  in  another  division  who 
have  specialized  in  the  methods  and  the  requirements  of 
each  job,  and  they  prepare  detailed  instructions  as  to 
how  work  shall  be  done.  Such  a  bureau  may  be  designated 
as  an  "instruction  bureau"  or  "instruction-card  bu- 
reau, ' ' 

Committee  Control 

The  committee  system  involves  the  carrying-on  of 
meetings  of  the  officers  of  the  business  or  shop  at  regular 
intervals.  At  these  meetings,  committees  appointed  to 
take  charge  of  specific  functions,  as  well  as  special  com- 
mittees which  act  from  time  to  time  on  matters  of  new 
methods  and  policies,  make  their  reports.  It  has  been 
claimed  that  in  industry  and  business  as  well  as  in  pri- 
vate life  there  should  be  no  attempt  at  government  with- 
out the  consent  of  the  governed,  and  the  advocates  of 
democracj  in  biisiness  and  industry  claim  that  the  com- 


6  Organization  and  Management 

mittee  system  is  most  productive  of  loyalty  and  intelli- 
gent co-operation. 

Committee  meetings  afford  an  opportunity  for  discuss- 
ing methods  proposed  by  staff  specialists  or  line  officers, 
and  give  the  chance  for  looking  at  these  proposals  from 
various  augles.  They  afford  an  opportunity  for  adverse 
critics  to  express  themselves  and  at  the  same  time  give 
the  proposer  a  chance  to  defend  his  schemes.  These 
meetings  provide  also  an  opportunity  for  the  various 
heads  to  get  better  acquainted  with  each  other  and  to 
recognize  the  good  points  in  each  other's  characters. 
Whether  the  control  be  line,  line  and  staff,  or  functional, 
the  committee  system  is  applicable. 

Among  the  purposes  of  various  committees  which 
report  to  the  general  meeting  of  officers,  we  may  cite  the 
following  as  representative : 

1.  The  manufacturing  committee,  which  decides  on 
the  manufacturing  program,  determining  what  stock  of 
manufactured  product  and  parts  shall  be  built,  and  dis- 
cussing the  general  status  of  orders  from  customers  and 
summarized  reports  from  the  order-of-work  bureau. 

2.  The  tool  committee,  which  determines  on  new  tools, 
considering  whether  the  conditions  justify  them  or  not 
and  selecting  the  most  important  ones.  This  is  an  im- 
portant matter  in  a  seasonal  business  such  as  automobile- 
building,  where  cheapness  of  production,  rapidity  of 
getting  out  new  styles,  and  interchangeability  depend 
largely  on  the  adoption  of  tools  that  can  be  built 
quickly  by  a  department  which  under  no  circumstances 
can  hope  or  expect  to  get  out  a  complete  set  of  tools 
before  the  current  season  is  over. 

3.  The  suggestion  committee,  which  considers  all  sug- 
gestions as  to  improvements  and  decides  on  the  awards 
for  the  best  suggestions,  as  well  as  ways  and  means  of 


Principles  of  Organisation  7 

keeping  the  suggestion  system  up  to  a  state  of  high 
efiSciency. 

4.  The  safety  committee,  which  will  make  recom- 
mendations for  safeguarding  machinery  and  for  provid- 
ing conditions  favorable  to  the  health  and  physical  well- 
being  o-f  employes. 

5.  The  welfare  committee,  which  can  consider  such 
matters  as  social  activities,  athletics,  library,  home  better- 
ment, etc, 

6.  The  educational  committee,  which  will  consider  the 
apprenticeship  system  and  methods  of  providing  special- 
ized education  for  all  classes  of  employes,  so  as  to  make 
them  more  effective  in  the  business. 

7.  The  committee  on  new  designs  or  new  products. 

8.  The  committee  for  considering  cost  reductions  and 
economies  in  general. 

9.  The  committee  on  complaints. 

Types  of  Conteol  Compabed 

Line  control  is  avowedly  autocratic.  It  demands  un- 
qaestioning  obedience  to  the  line  officer.  The  matter  of 
obtaining  results  is  put  up  to  each  succeeding  lower  officer 
in  the  line  by  the  officer  at  the  top.  The  danger  is  that  the 
lowest  line  officer  is  apt  to  put  it  up  to  the  men  in  the 
ranks  to  get  results  in  a  variety  of  activities.  Line  control 
demands  the  greatest  degree  of  all-round  ability  on 
the  part  of  each  officer  and  each  man  in  the  ranks. 

Line-and-staff  control  recognizes  the  value  of  special 
education  and  training  and  accepts  the  advice  of  spe- 
cialists. On  the  part  of  line  officials  there  is  apt  to  be  a 
considerable  amount  of  mental  reservation  as  to  the 
desirability  of  certain  staff  recommendations  coupled  with 
frequent  failure  to  carry  out  the  recommendations  of  the 
staff.    However,  there  is  no  question  but  that  it  is  a  great 


8  Organization  and  Management 

advance  over  the  all-line  type  of  control  and  has  super- 
seded the  latter  in  practically  all  industries  requiring 
expert  engineering  and  chemical  skill,  such  as  the  steel 
industry  and  chemical  manufacturing. 

Functional  control  brings  the  expert  guidance  into  im- 
mediate touch  with  the  worker,  as  applied  to  his  daily 
routine.  Functional  control  is  apt  to  be  strenuously  re- 
sisted by  the  incumbents  of  positions  of  authority  in  the 
old  line  organization,  who  resent  interference  with  their 
autocratic  authority.  It  is  unquestionably  coming  into 
Avider  use  in  our  industrial  undertakings,  since  in  almost 
every  large  industrial  center  we  find  factories  in  which 
such  matters  as  routing,  scheduling,  and  instructions  to 
men  are  being  taken  care  of  by  functional  bureaus. 

Specialization 

It  has  been  truly  stated  that  the  two  great  underlying 
principles  of  modern  industry  and  business  are  combina- 
tion and  specialization.  The  combining  of  small  under- 
takings into  large  ones  naturally  paved  the  way  for 
minute  specialization.  In  the  administrative  field  of 
business  we  find  the  principle  of  specialization  first 
appearing  in  the  division  of  management  under  three 
headings,  namely,  producing,  selling,  and  accounting. 

On  the  production  side  we  find  the  principle  appearing 
in  the  departmentalization  of  factories.  The  first  natural 
division  of  a  metal-working  factory  was  into  foundry, 
forge-shop,  pattern-shop,  and  machine-shop,  with  the  de- 
signing and  drafting  done  by  the  superintendent  and 
assistants.  This  division  was  followed  by  distinct  de- 
signing and  drafting  departments,  separate  departments 
for  distinct  processes  in  the  machine-shop,  such  as  lathe 
department,  drill-press  department,  sorew-machine  de- 
partment, etc. 


Principles  of  Organizatio7i  9 

AVith  the  expansion  and  enlargement  of  shops  we  find 
the  work  of  the  individual  workman  becoming  more 
specialized  and  restricted.  The  all-round  mechanic  has 
become  practically  obsolete.  As  a  result  strong  efforts 
were  requisite  to  develop  courses  of  training  to  counteract 
the  harmful  effects  of  over-specialization.  Continuously 
performing  the  same  task  has  been  found  to  deteriorate 
rapidly  the  body  and  mind  of  the  worker.  It  has  been 
claimed  that  the  loss  due  to  this  rapid  deterioration,  which 
means  a  lessened  earning  power,  is  greater,  from  the 
public  point  of  view,  than  any  gain  the  consuming  public 
has  made  by  the  greater  speed  and  cheaper  pay  of  men 
kept  at  a  single  operation. 

Specialization  and  Functionalization  C'onteasted 

Functional  control  must  be  clearly  distinguished  from 
specialized  departmentalization.  Functional  control 
means  the  selection  of  some  feature  of  the  work  common 
to  all  departments,  and  placing  the  control  of  this  feature 
in  the  hands  of  those  men  in  the  existing  set  of  employes 
most  capable  in  that  special  feature.  The  special  features 
here  referred  to  are  those  relating  more  particularly  to 
planning,  inspection,  repairs,  and  speed  of  machinery, 
and  not  to  technical  processes  peculiar  to  individual  de- 
partments. 

It  has  been  truly  said  that  the  all-round  man  does 
not  exist.  A  man  may  be  a  fairly  good  all-round 
mechanic,  but  it  is  likely  that,  if  his  mechanical  skill  is 
pronounced,  he  will  be  lacking  in  certain  desirable 
mental  qualities  essential  to  successful  planning  of  work. 
Some  foremen  and  some  men  in  the  ranks  have  the  mental 
characteristics  that  peculifirly  fit  them  to  be  engaged  in 
scheduling  or  order-of-work  activities.  To  others  such 
work  is  distasteful,  while  they  might  be  remarkably  well 


10  Organization  and  Management 

adapted  to  work  connected  with  accuracy  or  inspection. 
Others  would  not  have  the  characteristics  necessary  to 
excel  in  either  of  the  above-mentioned  features,  but  would 
be  admirably  adapted  to  finding  out  the  greatest  speed 
which  may  be  used  without  fatigue,  and  with  due  allow- 
ance for  necessary  periods  of  rest. 

For  this  last-named  function,  men  who  have  the  reputa- 
tion of  being  drivers,  or  who  are  not  well  liked  by  the 
workmen,  would  not  do  at  all.  Functionalization,  it  is 
e\ddent,  is  important  in  the  matter  of  control.  Specializa- 
tion is  impoi-tant  in  departmentalizing  a  business  or 
industry  in  accordance  with  the  materials  and  processes 
which  naturally  form  a  distinct  division.  Specialization 
is  the  natural  outcome  of  the  merging  of  small  businesses 
into  larger  ones. 

Combination 

One  of  the  causes  for  the  study  of  principles  of  organi- 
zation as  applied  to  business  and  industry  has  been  the 
tendency  toward  combination,  aggregation,  integration, 
or  consolidation  of  businesses.  Such  integration  may  be 
partial,  if  it  affects  only  one  of  the  leading  production 
factors,  such  as  the  selling  end,  or  selling  and  producing, 
or  it  may  be  complete,  if  it  affects  the  source  of  raw 
materials,  the  transportational  facilities,  the  production, 
and  the  selling.  An  example  of  almost  complete  integra- 
tion of  production  factors  is  afforded  in  the  organization 
of  the  large  steel  companies.  In  the  oil  companies  we 
have  another  example,  although  the  raw-material  sources 
are  frequently  leased  in  this  industry.  Naturally  the 
planning  of  the  organization  for  a  given  business  or  indus- 
try is  affected  by  the  extent  to  which  combination  of 
production  factors,  and  of  various  smaller  business  units, 
enters  into  the  problem. 


Principles  of  Organization  11 

Classes  op  Industry 

Industry  is  broadly  divided  into  the  following  classes : 
(1)  producing,  (2)  transporting,  (3)  financing,  (4)  dis- 
tributing. 

In  the  producing  class  we  have  agriculture,  mining, 
and  manufacturing.  In  transportation  we  have  railways, 
steamship  companies,  canals,  express  companies,  and  local 
delivery  companies.  In  financing  we  have  banking,  insur- 
ance and  bonding  companies,  stock  exchanges,  and  bond 
houses.  In  distribution  we  have  wholesalers,  jobbers, 
brokers,  and  retailers. 

Manufacturing  industries  are  classified  according  to 
their  processes  as  analytic  or  synthetic,  and  as  having 
consecutive,  simultaneous,  or  intermittent  processes,  or 
combinations  of  these.  Analytic  manufacturing  separates 
a  raw  material  into  its  constituents,  selecting  and  assort- 
ing them  as  leading  products,  by-products,  and  waste. 
The  lumbering  business  is  an  example  of  this  type.  Syn- 
thetic manufacturing  builds  up  a  compound  product  out 
of  simple  raw  materials.  An  example  of  this  last-named 
type  is  furniture-building.  Consecutive  processes  are 
apparent  in  a  cement  mill,  a  hat  factory,  or  a  wall-paper 
factory.  Simultaneous  processes  are  apparent  in  an 
automobile  factory. 

System 

System  is  a  term  applied  to  the  methods  by  which  the 
objects  of  the  organization  are  carried  out  in  an  orderly 
way.  We  organize  to  manage,  and  we  manage  largely 
through  system.  The  characteristics  of  good  system  are 
simplicity  and  efficiency.  When  system  is  lacking  in  these 
characteristics,  it  is  well  named  "red-tape." 


12  Organization  and  Management 

Having  planned  an  organization  and  determined  on  the 
activities,  authorities,  and  limits  of  action  of  each  indi- 
vidual and  group  of  individuals,  we  prepare  a  series  of 
ways  and  means  for  securing  results  as  planned.  These 
methods,  when  arranged  according  to  a  logical,  scien- 
tific, and  orderly  plan,  constitute  system.  A  man  may 
be  a  good  systematizer,  and  yet  not  be  a  good  organizer, 
and  even  a  poor  manager.  The  man  who  aspires  to  rise 
higher  than  a  systematizer  must  make  system  his  serv- 
ant and  be  ever  watchful  lest  the  situation  be  reversed 
and  he  become  system's  slave. 

Efficiency 

By  efficiency  we  mean  the  ratio  of  output  to  intake. 
For  instance,  an  electric  motor  of  85  per  cent  efficiency 
gives  out  only  85  per  cent  of  the  horse-power  value  of 
the  electricity  delivered  to  it.  In  speaking  of  the  effi- 
ciency of  a  cost  system  or  production  system,  we  are 
comparing  the  net  useful  worth  of  the  results  secured 
through  such  a  system  with  the  total  cost  of  operating 
the  system  in  the  way  of  salaries  of  clerical  and  adminis- 
trative employes,  cost  of  stationery,  and  first  cost  and 
depreciation  in  value  of  furniture,  fixtures,  and  mechan- 
ical appliances  required  to  carry  out  the  system. 

A  system  devised  for  a  specific  industry  and  organiza- 
tion can  rarely  be  applied  to  another  industry  or  to  a 
different  type  of  organization  in  the  same  industry.  It 
is  the  sure  sign  of  an  amateur  to  be  a  "form-collector" 
and  to  spend  more  time  in  devising  the  details  of  card 
indexes,  loose-leaf  files,  and  storage  cabinets  than  in 
studying  and  mastering  principles.  On  the  other  hand, 
it  is  equally  the  earmark  of  the  ignoramus  and  reaction- 
ary to  decry  all  principles  of  organization  and  all  orderly 
methods  as  ''red-tape." 


Principles  of  Organization  13 

Correct  Use  of  Technical  Terms 

The  preceding  discussion  has  laid  stress  on  defining 
the  meaning  of  certain  terms.  The  dictionary  and 
encyclopaedia  give  us  definitions  of  terms  in  several  ways. 
They  usually  lay  greatest  stress  on  the  meaning  of  the 
terms  when  used  in  their  most  commonly  accepted  popular 
sense.  They  give  us  also  the  meaning  of  these  terms  when 
used  in  a  technical  sense.  For  instance,  when  used  as  a 
technical  legal  term,  a  word  has  a  different  meaning  from 
that  which  it  conveys  in  its  most  general  popular  use. 
Business  and  industrial  management,  as  they  have  devel- 
oped into  sciences,  have  adopted  certain  words  in  a 
technical  way  in  just  the  same  manner  as  legal  science 
has  done. 

For  the  sake  of  uniformity  of  expression  and  mutual 
understanding,  it  is  therefore  necessary  for  the  student 
of  business  and  industrial  management  to  familianze 
himself  with  the  technical  meaning  of  the  terms  used  in 
his  profession  and  to  use  them  in  the  same  sense  and 
A^th  the  same  meaning  as  they  convey  when  used  by  men 
who  are  the  leaders  in  his  profession.  Hence,  the  begin- 
ner is  advised  to  study  carefully  the  terms  used  in  this 
and  the  following  chapters.  They  have  been  carefully 
selected  with  a  view  to  representing  the  most  generally 
accepted  expressions  of  correct  present-day  usage.  There 
is  a  tendency  among  narrow-minded  men  who  have  made 
a  mistake  in  the  emplojTuent  of  terms  to  say,  ''Well,  we 
use  that  word  here  to  mean  something  else. ' '  The  danger 
of  insistence  on  a  different  meaning  from  the  generally 
accepted  one  is  that  it  will  confuse  new  employes,  audi- 
tors, and  other  members  of  the  organization. 


14  Organization  and  Management 

Developing  Organizing  Ability 

As  promotion  to  positions  of  responsibility  frequently 
hinges  on  the  reputation  of  being  a  good  organizer,  it  is 
worth  the  while  of  every  ambitious  worker  to  know  some- 
thing about  how  to  develop  organizing  ability.  The  first 
requisite  is  a  keen  interest  in  one's  duties,  coupled  w^ith 
strict  self -discipline  in  performing  one's  assigned  routine 
tasks  in  accordance  with  directions  of  superior  officers. 

There  will  always  be  room,  however,  for  the  individual 
to  show  ability  in  systematizing  materials  and  tools  in 
an  orderly  and  sequential  way,  whether  his  work  be 
mechanical  or  clerical.  The  manner  in  which  a  clerk  keeps 
his  pens,  ink,  pencils,  erasers,  and  current  supply  of 
stationery,  and  the  orderliness  of  the  drawers  in  his  desk 
assigned  him  for  his  personal  private  use,  may  be  made 
the  subject  of  his  careful  thought. 

No  matter  in  how  detailed  a  manner  the  routine  work 
may  have  been  specified  by  higher  authority,  there  will 
always  be  found  opportunities  to  systematize  work  as  well 
as  materials  and  tools.  Naturally,  the  man  who  has  super- 
vision over  several  others  will  find  a  still  wider  field  in 
which  he  can  practice  the  development  of  organizing 
ability.  In  later  chapters  the  human  element  in  manage- 
ment will  be  dwelt  on  at  greater  length.  For  the  present 
it  will  suffice  to  say  that  an  agreeable  personality  which 
commands  respect  is  important  in  the  ability  to  organize 
men. 

TEST  QUESTIONS 

1.  Define  organization.     What   are   the   aims   of   industrial 
organization  ? 

2.  How  is  an  organization  designed?    Describe  the  analytical 
or  investigational  steps  and  the  synthetic  or  constructive  steps. 

3.  How  is  management  related  to  organization? 


Principles  of  Organisation  15 

4.  What  part  does  system  play  in  relation  to  organization 
and  management? 

5.  How  do  all-line  control,  line-and-staff  control,  and  func- 
tional control  differ? 

6.  Does  committee  control  replace  any  of  the  other  types 
of  control,  or  can  it  be  used  in  connection  with  them?  What 
types  of  activities  may  well  be  conducted  under  committee  con- 
trol ? 

7.  Do  you  consider  military  types  of  control  necessary  or 
advisable  in  industrial  undertakings? 

8.  Contrast  specialization  and  funetionalization. 

9.  What  are  some  of  the  leading  general  functions  in  an  in- 
dustrial undertaking? 

10.  From  what  classes  of  employes  would  you  build  up  vari- 
ous committees? 

11.  How  are  industries  classified? 

12.  What  is  the  argument  in  favor  of  correct  use  of  technical 
terms  ? 

13.  How  may  one  develop  organizing  ability  ? 

14.  How  does  the  human  element  enter  into  management 
problems  ? 

15.  Contrast  departmentalization  by  product  with  depart- 
mentalization by  processes. 

16.  In  what  way  does  the  functional  expert  apply  his  spe- 
cialized knowledge  to  the  regular  running  production  routine  to 
a  greater  extent  than  the  staff  expert  ? 

17.  In  what  way  can  principles  of  democracy  and  self-gov- 
ernment be  introduced  into  industry  without  injury  to  the  inter- 
ests of  the  proprietorship? 

18.  Which  type  of  organization,  military  or  functional,  re- 
quires the  most  capable  all-round  supervisional  heads  and  why? 

19.  How  has  the  tendency  toward  larger  industrial  units  due 
to  combination  and  consolidation  affected  production  factors  ? 

20.  Give  some  examples,  drawn  from  your  own  knowledge  or 
experience,  of  analytic  industries,  of  synthetic  industries,  of 
simultaneous  processes,  of  consecutive  processes. 


CHAPTER  II 
types  of  organization 

Making  Charts  op  Organization 

The  relationships  between  departments  and  the  scope 
of  activities  and  limits  of  authority  of  various  officials 
and  department  heads  are  most  clearly  visualized  through 
the  medium  of  organization  charts.  Such  charts  usually 
represent  the  leading  departments  by  rectangles  or 
circles.  These  departments  are  then  connected  by  lines 
showing  their  relationships  to  one  another. 

Charting  Line  Control 

Figure  1  shows  the  application  of  charting  to  illustrate 
line  control.  An  inspection  of  this  chart  shows  that  the 
board  of  directors  (1)  formulates  certain  policies  which 
are  carried  out  by  the  general  manager  (2),  the  latter 
being  free  to  adopt  such  methods  as  he  sees  fit.  The 
general  manager  has  charge  of  three  distinct  divisions, 
these  having  to  do  with  accounting,  producing,  and  sell- 
ing, and  supervised,  respectively,  by  the  comptroller 
(3),  the  works  manager  (4),  and  the  sales  manager  (5). 

The  works  manager  has  jurisdiction  over  the  produc- 
tion superintendents,  namely,  the  superintendent  of 
foundry  (6),  superintendent  of  forge-sliop  (7),  and 
superintendent  of  machine-shop  (8).  Each  of  these 
superintendents  has  jurisdiction  over  a  number  of  fore- 

16 


Types  of  Organization 


17 


TROL 


COMPTROLLER 


© 

SUPT.    FOUNDRY 

9 

9 

9 

TJ 


BOARD  OF  DIRECTORS 


GENERAL  MANAGER 


© 
WORKS  MANAGER 


^ 

SUPT.  FORGE    SHOP 


Mm     [13[^     llSOol   [iolliol      [iolOo]     Mm   lJol[!ol     [jollio]     DoHJol 

Fig.  1. — Chart  Illustrating  Line  Control 

Squares   marked    "9"    represent   department  foremen. 
Squares  marked   "10"   represent  gang  bosses. 


® 
BOARD  OF  DIRECTORS 


GENERAL  MANAGER 


® 
W0RK5  MANAGER 


6,  7,  8,  etc..  same  as  in  Fig.  I 


Fig.    2. — Chart   Illustrating   Line-and-Staff   Control 
Squares  marked  "4A"  and  "4B"  represent  the  staff  for  expert  guidance. 


18 


Organization  and  Management 


men  (9).  Each  of  these  foremen  has  jurisdiction  over 
a  number  of  gang  bosses  (10),  through  whom  orders  are 
given  to  the  men  in  the  ranks. 

Charting  Line-and-Staff  Control 

Figure  2  shows  line-and-staff  control.  In  this  type  of 
organization  we  have  the  line  organization  identical  with 
that  sho\vn  in  Figure  1.  The  works  manager  (4),  how- 
ever, is  assisted  by  a  staff  consisting  of  the  chief  engineer 
(4A)  with  his  force  of  assistants,  and  the  chemist  (4B) 
with  his  force  of  assistants.  These  staff  officials  report 
to  the  works  manager  on  technical  questions  connected 
with  their  specialties. 


Charting  Functional  Control 

Figure  3  is  a  chart  illustrating  functional  control.  In 
this  chart  the  works  manager  (1)  exercises  his  control 
through  the  medium  of  the  functional  heads  (2  to  9). 
These  functional  heads  have  charge  of  the  following 
branches  or  bureaus:  (2)  order  of  work  and  routing;  (3) 


Fig.  3. — Chart  lUustrating  Functional  Control 


Types  of  Organization 


19 


instruction  cards;  (4)  time  records  and  costs;  (5)  disci- 
pline; (6)  gang  and  specialized  department  supervision; 
(7)  speeds  and  methods  of  operating  machinery;  (8) 
repairs;  (9)  inspection. 

These  eight  functional  heads  consult  directly  with 
the  men  in  the  ranks  (10),  either  personally  or  through 
assistants,  giving  advice  and  instinictions  direct  to  the 
workmen. 

Charting  Committee  Conteol 

Figure  4  is  a  chart  illustrating  committee  control  in 
connection  with  functional  control.     The  functional  or- 


FiG.   4. — Chart  Illustrating  Committee  Control  over  Certain  Activities 
together   with   Functional   Control   over   Shop   Routine 


20  Organization  and  Management 

ganization  is  identical  with  that  shown  in  Figure  3.  The 
works  manager  is,  however,  assisted  by  various  commit- 
tees, shown  bj  circles  lA  to  ll,  inclusive.  Of  these  lA 
represents  the  manufacturing  committee;  iB,  the  tool 
committee;  iC,  the  suggestion  committee;  ID,  the  safety 
committee;  lE,  the  welfare  committee;  iF,  the  educa- 
tional committee;  IG,  the  committee  on  designs  or  new 
product;  iH,  the  committee  on  cost  reduction;  ll,  the 
complaint  committee. 

Chakt  Illustrating  Departmental  Specialization 

Figure  5  illustrates  how  departmental  specialization  is 
arranged  for  through  the  medium  of  distinct  productive 
departments,  each  department  being  in  charge  of  a  fore- 
man or  gang  boss  who  is  a  specialist  in  the  processes  in- 
dicated. In  this  chart  the  works  manager  (1)  exercises 
supervision  through  the  superintendent  of  the  forge- 
shop  (2),  superintendent  of  the  foundry  (3),  and  super- 
intendent of  the  machine-shop  (4).  The  superintendent 
of  the  forge-shop  controls  the  work  of  that  shop  through 
specialized  foremen  as  follows:  foreman  of  hand-forg- 
ing (5),  foreman  of  drop-forging  (6),  foreman  of  ma- 
chine-forging (7),  foreman  of  tool-forging  (8). 

The  superintendent  of  the  foundry  exercises  control 
over  the  foundry  through  the  medium  of  the  foreman  of 
core-making  (9),  foreman  of  flasks  (10),  foreman  of 
molders  (11),  foreman  of  cupolas  (12). 

The  superintendent  of  the  machine-shop  exercises  his 
control  through  the  foreman  of  the  machine-tool  depart- 
ment (13),  foreman  of  tool  room  (14),  foreman  of  group 
assembly  (15),  foreman  of  erecting  (16).  The  foreman 
of  the  machine-tool  department  exercises  his  control 
through  certain  gang  bosses,  such  as  lathe  gang  boss 
(17),  planer  gang  boss  (18),  drill  gang  boss  (19),  etc. 


Types  of  Organization 


21 


The  chart  of  departmental  subdivision  of  a  plant  by 
processes  (Fig.  5)  may  be  supplementary  to  and  entirely 
independent  of  a  chart  shomng  functional  control,  each 


SUPT.  FORGE 
SHOP 


0 


2?! 

^> 

z 

o 


® 


35 
^€ 

z 

o 


© 


S> 

z 

o 


IIIX. 


H 
O 

O-n 
r-o 

z 

o 


(D 

WORKS  MANAGER 


®       (io)       (n) 


n 
o 

S3 

7\> 

zZ 

o 


(D 


SUPT. 
FOUNDRY 


TI 


-no 

-I 


oo 
z> 


0 


SUPT. 
MACHINE   SHOP 


>> 


/ 


Zm 

8^ 


© 


?5o 


8| 


n 
o 

r-"n 

^^ 

m> 
2Z 


(16) 


pi-n 
nm 

oz 


© 


HO 


© 

D 

E  o 

r-  > 
r-  Z 

^  o 


Fig.  5. — Chart  Illustrating  Departmental  Specialization  by  Processes 


of  the  various  specialists  occupying  \'irtually  the  same 
position  in  the  functional  organization  as  the  gang  boss 
in  Figure  4.    In  functional  control  the  foremen's  duties 


22 


Organization  and  Management 


do  not  include  any  of  those  assigned  to  the  functional 
heads,  but  are  confined  to  technical  questions  as  to  set- 
ting up  work  in  machines  and  assisting  the  men  to  do 
the  work  in  accordance  with  their  instruction  cards. 

''Three-column"  Type  of  Industrial  Organization 

The  charts  shown  in  Figures  1  and  2  illustrate  what  is 
designated  as  the  ''three-column"  type  of  industrial  or- 


GENERAL  MANAGER 


© 


ASSISTANT  GENERAL  MANAGER 


^0\ 

XiK  ,/Q\  X&\.  y<^  ytih^M^^ 

/        Mo~y      \/      Mcdiod,     \/     M>J^tr,     \^    Malo,.l,       \/        Ma.          \/          M..k«.^>w 

Organizing 

Accountant 

Chief 

Tool 

Purchasing 

Employ- 

Sales 

Engineer 

Auditor 

Engineer 

Designer 

Agent 

ment 

Manager 

Works 

Store- 

Advertising 

Correspon- 

Bookkeeper 

Engineer 

keeper 

Works 

Manager 

dent 

Cashier 

Chief 

Receiving 

Supt. 

Transporta- 

Cost-keeper 

Inspector 

Clerk 

Welfare  and 

Safety 

Manager 

Director 

Corporation 

School 

tion 
Manager 

Fig.   6. — Chart  Illustrating  Organization  Embodying  Going's  Principle  ol 
the  "Seven  M's" 


ganization,  in  which  the  activities  of  an  industrj'^  are  di- 
vided into  three  distinct  groups,  namely,  (1)  production, 
(2)  selling,  and  (3)  accounting.  This  division  is  the  most 
usual  one,  but  it  is  by  no  means  the  only  division,  and 
it  must  not  be  assumed  that  other  tj^es  of  general  or- 


Types  of  Organization  23 

ganization  which  depart  from  this  type  may  not  be  more 
effective  under  certain  circumstances.  Indeed,  there  has 
been  a  tendency  to  depart  from  the  "three-column"  type 
within  recent  years. 

The  Seven  M's 

Charles  B.  Going  advocates  organization  under  seven 
distinct  headings.  For  easy  memorizing  of  these  heads 
he  uses  a  word  beginning  with  M  for  each,  namely,  Man- 
agement, Materials,  Men,  Machinery,  Methods,  Money, 
and  Markets.  Figure  6  illustrates  a  type  of  organization 
in  which  these  seven  factors  are  made  the  underlying 
basis.  An  organization  of  this  kind  is  in  use  at  the 
Remington  T}^e writer  Works,  and  has  proved  entirely 
satisfactory. 

Chakting  Progkess  of  Okdees 

Charts  are  sometimes  advantageously  employed  to 
show  the  progress  of  an  order  through  various  depart- 
ments. Figure  7  shows  such  a  chart.  An  examination 
of  this,  beginning  at  the  top,  indicates  that  the  order  is 
first  received  by  the  sales  department,  whence  it  passes 
to  the  works  manager's  office,  where  the  order  is  entered, 
and  from  which  three  groups  of  activities  connected  with 
the  execution  of  the  order  are  put  into  action.  On  the 
left-hand  side  the  order  passes  through  the  designing  de- 
partment, which  in  turn  passes  it  to  the  drawing  depart- 
ment for  the  making  of  such  drawings  as  are  needed  to 
supplement  any  new  designs  or  for  the  requirements  of 
the  shop.  Thence  it  passes  to  the  inspection  department 
whose  duty  it  is  to  inspect  materials,  work  in  process,  fin- 
ished parts,  assembly  groups,  and  erecting.  Wlien  the 
work  is  finished,  it  is  tested  by  the  testing  department. 


24 


Organization  and  Management 


which  must  also  receive  a  copy  of  the  order  and  specifica- 
tions. 

Following  next  the  right-hand  path,  we  find  that  the 


SALES 
DEPARTMENT 


WORKS  MANAGER'S 
OFFICE,  ORDER  ENTERED 


.  PLANNING  OR 
PRODUCTION  DEPT. 


ROUTING 


INSTRUCTION  CARD 
WRITING 

RATE  FIXING 


ORDER  OF  WORK  OR 
SCHEDULING 


FOLLOWING  UP 
OR  TRACING 


SHOP 
DEPARTMENTS 


SHIPPING 
DEPARTT-1ENT 


ACCOUNTING 
DEPARTMENT 


Fig.  7. — Chart  Illustrating  Progress  of  a.ii  Order  through  Variou? 

Departments 

This  type  of  chart  may  be  made  in  the  form  of  the  hot-water  bottle,  as  shown, 
or  other  convenient  shape. 

accounting  department  has  received  a  copy  of  the  order, 
the  connecting  line  between  the  accounting  department 


Types  of  Organization  25 

and  the  production  department  showing  that  the  latter 
provides  such  information  as  is  required  by  the  former 
in  reference  to  stores  and  materials  to  be  purchased  for 
the  order.  The  accounting  department  passes  the  order 
to  the  stores  department,  where  an  analysis  of  the  bill 
of  material  is  made  and  the  balance-of-stores  records 
checked  up  to  indicate  what  materials  and  parts  are  on 
hand  and  those  which  have  to  be  made  in  the  shop,  the 
production  department  being  notified  of  the  results  of 
this  accounting.  Next,  the  purchasing  department  re- 
ceives from  the  stores  department  the  information  as  to 
what  purchases  need  to  be  made  by  reason  of  the  entry 
of  the  order.  Next,  the  cost  department  is  notified  of 
the  order  and  its  status  as  to  parts  to  be  drawm  from 
stock,  parts  to  be  purchased,  and  parts  to  be  built  in  the 
shop. 

Following  the  center  path,  we  find  the  planning  or  pro- 
duction department  receiving  the  order  simultaneously 
with  the  designing  department  on  the  left  and  the  ac- 
counting department  on  the  right.  The  planning  depart- 
ment at  once  starts  another  set  of  activities  requisite  to 
the  expedition  of  the  order  through  the  shops.  As  indi- 
cated, these  activities  pertain  to  the  routing  of  the  order 
through  the  shop  departments,  the  getting  ready  in  ad- 
vance of  detail  instructions  as  to  the  making  of  each 
piece  and  group  and  putting  them  together.  Next  comes 
the  work  of  rate-fixing  or  the  establishment  of  such  in- 
ducements or  rewards  in  the  waj  of  premiums,  bonuses, 
or  piece  rates  as  will  be  offered  in  connection  with  the 
order.  Then  comes  the  proper  placing  of  the  various 
parts  required  in  the  shop's  program  of  work,  after  which 
each  part  and  group  and  the  order  as  a  whole  is  followed 
up  or  traced  as  it  progresses  through  the  shop.    Finally, 


26  Organization  and  Management 

the  various  sub-orders  must  be  delivered  with  all  instruc- 
tions to  the  various  shop  departments. 

Looking  at  the  lower  part  of  the  chart,  we  see  that  the 
work  of  the  shop,  including  the  completion  of  the  work 
of  the  planning  department's  branches,  is  finished  simul- 
taneously with  the  work  of  the  testing  department  on 
the  left-hand  or  technical  engineering  branch,  and  with 
the  work  of  the  cost  department  on  the  right-hand  or 
accounting  branch.  The  order  now  passes  to  the  shipping 
department,  and  after  shipment,  all  data  go  again  to  the 
accounting  department  for  billing  and  determination  of 
the  profit  or  loss  on  the  order. 

FORM  OF  GRAPHICAL  CHART  TO  INDICATE  PROGRESS  OF  ORDERS 

The  example  just  given  is  arranged  in  a  manner  w^hich 
has  been  designated  as  the  ''hot-water  bottle"  type  of 
chart.  Other  striking  forms  which  may  be  used  for  this 
purpose  are  charts  in  the  form  of  an  hourglass  or  dra^\Ti 
up  so  as  to  imitate  the  lines  of  the  nervous  and  circulatory 
system  of  the  human  body.  For  the  most  part  these  de- 
vices are  merely  "catchy"  talking-points  used  by  pro- 
fessional systematizers. 

The  best  way  to  arrange  such  a  chart  is  to  cut  out 
pieces  of  paper  in  the  form  of  circles  or  rectangles,  a 
separate  piece  of  paper  being  prepared  to  represent  each 
separate  department  which  has  anything  whatever  to 
do  with  the  handling  of  an  order.  Next,  cut  out  a  number 
of  long,  narrow  strips  of  paper  to  serve  as  connecting 
paths  between  the  circular  or  rectangular  templets  al- 
ready cut  out.  Now,  connect  the  various  departments  in 
proper  sequence  Avhen  considered  from  the  viewpoint  of 
progress  of  orders,  grouping  together  such  departments 
as  come  under  one  general  supervisory  heading.  After 
this  arrangement  has  been  made,  you  can  change  the 


Types  of  Organizaiion  27 

proportions  of  the  circles  or  rectangles  in  such  a  way 
as  to  make  a  symmetrical  chart.  A  little  artistic  tempera- 
ment and  imagination  will  enable  you  to  construct  out 
of  the  chart  almost  any  kind  of  picture  desired,  if  you 
want  to  make  it  ''catchy." 

Indicating  Paths  of  Material  on  Charts 

By  making  comments  in  condensed  form  along  the  lines 
connecting  the  departments  after  they  have  been  arranged 
in  the  form  best  adapted  to  showing  the  progress  of  an  or- 
der, we  can  utilize  the  chart  not  only  to  indicate  the  prog- 
ress of  the  various  papers  connected  with  the  execution 
of  orders  as  they  pass  from  department  to  department, 
but  we  can  also  make  it  indicate  how  the  raw  materials, 
work  in  process,  finished  parts,  and  groups  flow  from  de- 
partment to  department. 

Figure  8  is  an  illustration  of  such  a  chart  as  prepared 
by  the  author  when  he  was  superintendent  of  an  auto- 
mobile factory.  This  chart  proved  to  be  very  useful  in 
training  the  various  store-room  assistants,  timekeepers, 
cost  clerks,  and  shop  foremen  to  a  comprehensive  under- 
standing of  shop  conditions.  Reference  to  the  chart  gave 
the  men  in  the  receiving  department  information  as  to 
where  various  classes  of  material  were  to  be  sent.  Simi- 
larly, each  shop  foreman  saw  that  the  parts  and  groups 
were  not  to  pass  to  or  from  his  department  indiscrim- 
inately, but  that  there  were  fixed  paths  to  be  followed 
implicitly.  The  finished  stock  room  was  the  clearing- 
house to  which  all  parts  or  groups  came  and  from  which 
they  issued  in  proper  sequence.  This  method  of  proce- 
dure made  it  easy  to  inspect  individual  parts  and  facili- 
tated control  over  the  flow  of  material.  It  prevented  the 
disorder  incident  to  using  the  shop  floor  as  a  store  room. 


28  Organization  and  Management 

Charting  Responsibilities  of  Department  Heads 

The  charts  illustrating  general  organization,  which 
have  been  heretofore  described,  make  no  reference  to  of- 
ficials or  departmental  heads  by  name.  In  preparing  an 
ideal  or  ultimate  organization  chart  for  an  existing  or 
new  business,  it  is  always  desirable,  first,  to  chart  the 
existing  organization  in  this  personal  manner.  It  will 
nearly  always  be  found  that  in  an  existing  organization 
the  personal  element  has  played  an  important  part.  The 
organization  has  frequently  had  to  adapt  itself  to  the 
personal  strength  or  weakness,  specialized  knowledge, 
or  versatility  of  various  individuals.  When  we  consider 
that  the  corporation  as  a  permanent  institution  is  likely 
to  outlive  the  various  existing  officials,  it  is  quite  appar- 
ent that  it  is  desirable  to  make  the  chart  of  the  organiza- 
tion as  nearly  ideal  as  possible.  It  frequently  happens, 
however,  that  the  realization  of  this  ideal  chart  must  be 
deferred  for  some  years.  In  the  meanwhile  it  is  im- 
portant that  various  officials  and  department  heads,  as 
well  as  minor  employes  in  the  various  departments,  un- 
derstand exactly  where  they  stand  and  to  whom  they 
are  responsible.  Hence,  it  is  highly  important  to  have 
an  organization  chart  showing  the  relationships  of  de- 
partments to  each  other  and  the  lines  of  responsibility 
and  authorit}'  of  the  ^'ario^s  officials. 

Figure  9  illustrates  a  chart  of  this  type.  It  refers  to 
the  same  establishment  as  the  one  shown  in  Figure  8,  and 
the  figures  designating  the  various  departments,  it  will 
be  noted,  are  the  same  in  each  chart.  The  name  of  each 
department  head  is  given  in  each  circle.  Blue-print  cop- 
ies of  this  chart  are  distributed  to  the  various  depart- 
ment heads  and  posted  on  the  various  bulletin-boards  in 
the  shops  and  offices.    While  in  some  cases  there  may  be 


J,    —    C7/^/^/=<   "7- 


tf'e  fid,^  /"^r*  <  fw  ^^ 


b 


Types  of  Organization  29 

good  reasons  for  treating  the  ideal  or  ultimate  organiza- 
tion chart  as  confidential  information  for  the  use  of  the 
compan}^  officers  and  general  manager,  there  is  every 
reason  why  a  chart  of  the  existing  organization  should 
receive  the  widest  publicity  among  employes.  Such  pub- 
licity ^\^.ll  prevent  any  misunderstandings  and  help  em- 
ployes towards  getting  a  clearer  understanding  of  the 
business  as  a  whole. 

TEST  QUESTIONS 

1.  What  are  organization  charts?    How  are  they  constructed? 

2.  Draw  an  organization  chart  showing  the  relationship  and 
responsibilities  of  stockholders,  directors,  general  manager,  and 
department  heads. 

3.  Draw  a  chart  illustrating  military  line  control  without 
staff. 

4.  Draw  a  chart  illustrating  line-and-staff  control. 

5.  Draw  a  chart  illustrating  functional  control. 

6.  Draw  a  chart  illustrating  the  sphere  of  action  of  shop  com- 
mittees. 

7.  What  are  some  of  the  activities  and  statistics  to  be  taken 
up  by  the  manufacturing  committee  ? 

8.  What  are  the  duties  of  the  tool  committee? 

9.  What  are  the  duties  of  the  suggestion  committee  ? 

10.  What  are  the  duties  of  the  safety  committee  ? 

11.  What  are  the  activities  to  be  considered  by  the  welfare 
committee  ? 

12.  What  sort  of  questions  are  taken  up  by  the  educational 
committee  ? 

13.  What  matters  does  the  committee  on  designs  of  new  prod- 
ucts consider? 

14.  What  sort  of  questions  will  be  investigated  by  the  com- 
mittee on  cost  reduction? 

15.  What  are  the  duties  of  the  complaint  committee? 

16.  Draw   and   explain   a   chart  showing  the  principal   sub- 


30  Organization  and  Management 

divisions  in  the  administrative,  production,  and  selling  divisions 
of  some  industry  ^\^tll  which  you  are  familiar. 

17.  What  are  the  seven  M's  listed  by  Charles  B.  Going  as 
the  principal  production  factors? 

18.  Draw  a  chart  showing  the  progress  of  an  order  from 
the  sales  department  through  the  designing  department  and 
planning  division  of  the  shop. 

19.  What  steps  are  taken  by  the  designing  department  on 
the  receipt  of  an  order? 

20.  When  a  production  order  is  issued,  how  is  the  provision 
of  necessary  materials  taken  care  of? 


CHAPTER  in 
locating  an  industry 

General  Considerations 

The  factors  that  enter  into  the  selection  of  a  location 
for  an  industry  concern  themselves  chiefly  with  the  three 
production  factors,  materials,  men,  and  markets,  although 
a  fourth,  namely  money,  also  plays  an  important  part. 
When  an  industry  is  about  to  be  started,  or  when  through 
consolidation  of  smaller  units  into  larger  a  combination 
has  taken  place,  one  of  the  most  important  questions  con- 
fronting the  management  is  that  of  where  the  industry 
is  to  be  located  so  that  from  every  viewpoint  the  site 
selected  shall  be  the  best.  After  the  particular  town  in 
which  the  industry  is  to  be  located  has  been  decided  upon, 
there  remains  to  be  solved  the  no  less  important  question 
as  to  what  particular  district  or  neighborhood  in  that 
town  will  be  best. 

So  far  as  the  selection  of  the  general  location  is  con- 
cerned, the  following  factors  need  consideration:  (1) 
raw,  semi-finished,  and  finished  materials,  supplies,  and 
accessories  essential  to  the  business;  (2)  power  required 
and  available  and  its  cost,  whether  water  power  or  gas 
power  is  preferable  to  coal,  or  coal  preferable  to  either 
of  the  others;  (3)  the  effect  of  climate  upon  production; 
(4)  transportation  facilities ;  (5)  the  desirability  of  water 
transportation;  (6)  labor  supply;  (7)  inducements  in  the 

31 


32  Organization  and  Management 

way  of  free  land  for  buildings,  cash  bonuses,  stock  sub- 
scriptions; (8)  money  market;  (9)  sales  markets;  (10) 
nearness  of  other  industries  in  the  same  or  similar  lines. 
So  far  as  the  local  site  is  concerned,  after  the  general 
location  has  been  selected,  we  have  to  deal  with  the  fol- 
lowing considerations:  (1)  space  for  expansion;  (2) 
fixed  charges  due  to  high  or  low  cost  of  land;  (3)  local 
labor  market;  (4)  nearness  of  this  local  labor  market  to 
site;  (5)  local  transportation  facilities  for  freight  and 
workmen;  (6)  fire  prevention;  (7)  nearness  to  local  trade 
centers.  These  various  factors  will  now  be  considered  in 
further  detail. 

Materials 

If  the  materials  required  are  but  few  and  bulky,  it  is 
quite  likely  that  nearness  to  supplies  of  cheap  raw  mate- 
rials will  be  an  important  factor.  Taking,  for  example, 
the  iron  and  steel  industries,  we  have  to  consider  that 
pig  iron  is  composed  of  approximately  28  per  cent  of 
coke,  16  per  cent  of  limestone,  and  56  per  cent  of  iron  ore. 
Some  forty  or  fifty  years  ago  central  Penns^dvania  was 
dotted  with  small  furnaces,  because  limestone  and  iron 
ore  were  plentiful  and  hickory  wood  for  coke  abounded. 
As  production  centers  rearranged  tliemselves  along  the 
lines  of  the  railroads,  the  cost  of  hauling  from  these 
country  furnaces  to  railroad  lines  became  an  important 
factor  and  soon  led  to  the  concentration  of  the  Pennsyl- 
vania iron  and  steel  furnaces  in  certain  railway  centers 
convenient  to  the  raw  materials. 

A  new  element  appeared,  however,  in  the  Superior  iron 
fields.  Here  the  iron  ore  was  so  located  that  it  could  be 
handled  by  mechanical  processes  with  a  minimum  of  wage 
cost,  since  it  could  be  conveniently  dug  with  steam  shov- 
els and  conveyed  by  machinery  to  the  holds  of  vessels, 


Locating  an  Industry  33 

which  in  turn  were  unloaded  by  machinery.  However, 
the  Superior  iron  fields  were  remote  from  coal;  hence, 
the  furnace  industry  spread  gradually  toward  the  lake 
ports  where  the  combined  cost  of  coal,  iron  ore,  and  lime- 
stone showed  a  most  favorable  cost  figure. 

Where  the  raw  materials  are  not  so  bulky,  as  for  in- 
stance in  the  textile  industries,  nearness  to  raw  mate- 
rials is  not  so  important.  The  New  England  States  still 
lead  in  textile  manufacturing,  although  the  raw  materials 
come  from  the  South  so  far  as  concerns  cotton,  and  from 
the  West  so  far  as  concerns  wool. 

Where  the  materials  supplied  are  numerous  and  of  a 
semi-finished  or  finished  nature,  as  is  the  case  in  an  as- 
sembling business  like  the  making  of  automobiles,  requir- 
ing supplies  of  bar  stock,  bolts,  nuts,  washers,  rods,  etc., 
in  great  variety,  as  well  as  drop-forgings  and  castings 
purchased  mostly  from  jobbing  shops,  the  best  market  for 
raw  materials  will  be  a  general  metal-manufacturing  ter- 
ritory. Here  there  will  be  competition  in  prices  of  the 
materials  as  well  as  avoidance  of  delays  due  to  a  scarcity 
of  suppliers  and  inability  to  follow  up  purchase  orders. 

Again,  taking  the  automobile  business,  after  it  has  been 
settled  that  a  metal-manufacturing  territory  is  essential, 
the  further  consideration  arises  as  to  nearness  to  manu- 
facturers of  finished  accessories  such  as  radiators,  mag- 
netos, tires,  etc.  All  of  these  considerations  have  led  to 
a  concentration  of  the  automobile-manufacturing  indus- 
tries in  a  territory  roughh^  indicated  by  a  line  connecting 
Buffalo,  Cleveland,  Indianapolis,  Lansing,  and  Detroit. 

Power 

Power  is  an  important  factor  in  the  steel,  glass,  brick, 
tile,  pottery,  iron,  and  forging  lines  of  business.  In  the 
assembling  ones  it  is  less  important.    There  are  also  cer- 


34  Organization  and  Management 

tain  metallurgical  and  electrochemical  industries  which 
require  a  great  proportion  of  power  in  their  conduct. 
These  considerations  have  resulted  in  the  establishment 
of  iron  and  forging  enterprises  in  locations  having  cheap 
coal  for  power  and  recommended  by  nearness  to  raw  ma- 
terials. Such  a  combination  is  found  in  Pennsylvania, 
Ohio,  and  parts  of  Indiana,  Illinois,  and  New  York.  A 
combination  of  clay  and  cheap  gas  fuel  such  as  is  required 
for  the  ceramic  industries  is  found  in  the  gas  fields  of 
West  Virginia  and  Ohio.  The  abundant  water  power  in 
the  vicinity  of  Minneapolis  accounts  for  the  establish- 
ment of  flour  mills  which  are  also  near  to  the  market  for 
raw  material.  Similarly,  cheap  power  combined  with 
cleanliness  has  led  to  the  establishment  of  the  carborun- 
dum works  and  shredded-wheat  factories  at  Niagara 
Falls. 

Climate 

Prior  to  the  perfection  of  mechanical  methods  of  hu- 
midifjdng,  dehumidifying,  heating,  and  cooling  local  bod- 
ies of  air  in  factories,  warehouses,  kilns,  etc.,  the  natural 
climate  played  an  important  part  in  the  selection  of  sites 
for  certain  factories  such  as  cotton  mills,  silk  mills,  cigar 
factories,  etc.  On  account  of  the  ability  of  manufactur- 
ers to  produce  artificially  almost  any  desired  climatic 
condition  in  the  factory,  climate  is  less  important  at  the 
present  time  for  the  foregoing  considerations  than  for 
its  influence  on  the  comfort  and  healthfulness  of  the 
workers  in  their  homes  and  life  outside  of  the  industry. 

Transportation  Facilities 

Where  the  raw  materials  and  finished  product  are  bulky 
and  heavy,  the  cost  of  transportation  is  an  important  fac- 
tor.   Where  the  materials  and  product  are  light,  the  prob- 


Locating  an  Industry  35 

lem  is  less  important  from  the  standpoint  of  first  cost 
of  production,  but  it  is  equally  important  from  considera- 
tions of  adequacy  of  service. 

From  considerations  of  transportation  costs,  that  loca- 
tion is  most  advantageous  which  minimizes  the  combina- 
tion costs  of  freight  and  express  on  incoming  materials 
and  on  outgoing  finished  goods.  In  the  furniture-manu- 
facturing industry,  for  example,  a  factory  located  close 
to  the  source  of  lumber  supply  might  have  any  advantage 
due  to  closeness  to  raw  materials  offset  by  the  high  freight 
on  finished  product  and  by  the  inability  to  make  quick 
deliveries  of  finished  product  owing  to  its  remoteness 
from  sales  markets. 

Convenience  to  various  fields  of  raw  materials  and  to 
markets  is  afforded  by  selecting  a  site  where  railways 
converge.  This  is  particularh^  true  when  the  railways  are 
long,  important  lines.  Examples  of  such  centers  are 
found  in  Kansas  City  and  Indianapolis. 

Adequacy  of  service  is  assured  where  there  is  competi- 
tion between  transportation  companies.  Rebates  and 
other  forms  of  rate-cutting  are  not  to  be  considered  as  a 
fruit  of  competition,  but  the  securing  of  commodity  rates 
and  prompt  car  service  as  well  as  prompt  attention  to 
tracers  are  all  advantages  resulting  from  rivalry  in  trans- 
portation service. 

.Water  transportation  is  advantageous  wherever  it  con- 
nects the  plant  with  important  sources  of  raw  material  or 
good  sales  markets.  It  by  no  means  follows  that  it  is  a 
weighty  factor  merel}^  in  those  industries  using  large 
bulky  materials  which  are  not  injured  by  water.  Lum- 
ber, iron  ore,  coal,  and  oil  are  certainly  important  items 
in  the  list  of  articles  carried  by  water-transportation 
companies,  but  an  inspection  of  the  docks  and  wharves 
at  any  of  the  inland  ports  where  railroads  and  water- 


36  Organization  and  Management 

ways  converge  will  reveal  the  miscellaneous  nature  of 
the  goods  shipped  by  water,  and  show  that  much  in  the 
way  of  finished  goods  is  carried  by  boat. 

Certain  inland  cities  afford  excellent  competition  be- 
tween land  and  water  transportation  as  well  as  a  wide 
field  for  operation  between  the  factory  on  the  one  hand 
and  raw  materials,  supplies,  and  sales  markets  on  the 
other.  Such  cities  usually  can  also  furnish  at  low  cost 
an  adequate  water  supply  for  power  and  manufacturing 
purposes  and  they  have  abundant  water  for  fire-depart- 
ment use.  Among  cities  of  this  class  we  may  mention, 
for  example,  Pittsburgh,  Cincinnati,  and  St.  Louis  as 
possessing  the  advantages  of  rivers  and  railroads,  Buf- 
falo, Erie,  Cleveland,  Detroit,  and  Milwaukee  are  rec- 
ommended by  the  competition  of  lake  and  rail  routes. 
Boston,  Providence,  New  York,  Philadelphia,  Savannah, 
New  Orleans,  Galveston,  and  San  Francisco  are  exam- 
ples of  cities  having  coastwise  shipping  routes  along  with 
railways,  being  at  the  same  time  convenient  for  foreign 
export  or  import. 

Labor  Supply 

An  industry  requiring  a  large  number  of  unskilled  la- 
borers is  preferably  located  near  a  source  of  that  kind  of 
labor.  The  tendency  of  immigi^ation  from  southern  and 
eastern  Europe  has  been  to  follow  certain  lines  of  distri- 
bution. Pittsburgh  and  Chicago  are  important  points 
on  these  lines  and  hence  afford  good  markets  for  a  sup- 
ply of  this  class  of  labor.  Certain  sections  of  the  country 
have  developed  centers  of  population  where  an  almost 
hereditary  liking  for  the  trades  requiring  a  medium  de- 
gree of  skill  is  found.  In  the  Connecticut  River  valley 
there  is  an  abundance  of  labor  proficient  in  operating  au- 
tomatic metal-working   machinery.     In   the    Cincinnati 


Locating  an  Industry  37 

territory  raachinists  are  plentiful.  In  Pennsylvania  steel 
and  furnace  workers  in  general  are  easily  found.  Indus- 
tries requiring  large  numbers  of  highly  skilled  operators, 
such  for  instance  as  engraving  and  lithographing  estab- 
lishments, usuallj^  find  large  centers  of  population  the 
best  source  of  supply  for  highly  skilled  labor. 

Special  Inducements  Offered 

A  grooving  industrial  center  ^ill  frequently  offer  de- 
sirable inducements  to  industries  in  search  of  a  location. 
These  inducements  may  take  the  form  of  free  sites  for 
buildings,  cash  bonuses,  stock  subscriptions,  or  a  com- 
bination of  all  of  these.  Free  land  alone  is  not  an  in- 
ducement unless  the  land  is  well  located,  is  subject  to  low 
tax  rates,  and  affords  opportunity  for  expansion.  More- 
over, the  to^VIl  in  question  must  be  of  some  strategic  value 
when  all  of  the  other  factors  already  discussed  are  taken 
into  consideration.  Cash  bonuses  are  less  frequent,  but 
their  equivalent  may  take  the  form  of  buildings  and  sites 
reverting  to  the  donors  in  case  the  industry  fails  to  keep 
its  part  of  the  agreement,  w^hich  is  usually  that  employ- 
ment is  to  be  given  to  a  specified  minimum  number  of 
men.  Cash  bonuses  are  sometimes  raised  by  a  sale  of 
lots  adjacent  to  the  land  given *the  new  enterprise.  Stock 
subscriptions  are  often  desirable  in  order  to  secure  the 
co-operation  of  local  investors  in  the  enterprise. 

All  of  these  inducements  must  be  considered  as  sec- 
ondary to  the  primary  advantages  of  best  natural  loca- 
tion. At  the  same  time  these  inducements,  coupled  with 
natural  advantages,  may  make  it  possible  to  start  a  thriv- 
ing industry  which  could  originate  in  no  other  way,  or 
they  may  enable  an  industry  which  is  handicapped  by 
lack  of  room  or  other  factors  to  find  just  the  right  place 
for  growth  and  expansion. 


38  Organisation  and  Management 

Money  Market 

Any  thriving  industry  depends  very  largely  on  local 
or  near-by  banks  for  occasional  advances  of  money  on 
the  securities  it  has  to  offer.  A  business  wishing  to 
realize  the  greatest  possible  earnings  from  its  capitaliza- 
tion can  afford  to  maintain  only  a  small  percentage  of 
that  capitalization  in  the  form  of  bank  balances,  since 
such  bank  balances  do  not  jjay  any  profits.  Yet  it  often 
happens  that  large  purchases  and  large  pay-rolls  must 
be  provided  for  before  the  receipts  from  the  sales  of  in- 
creased outputs  are  available.  Under  these  conditions  it 
is  important  that  local  banking  facilities  be  such  that  the 
business  can  be  put  on  an  equal  footing  with  similar  ones 
in  other  localities.  These  considerations  point  to  the 
need  of  investigating  the  local  money  market  as  an  im- 
portant factor  in  determining  the  location  of  the  pro- 
posed plant. 

Sales  Markets 

A  large  number  of  important  industries  made  their 
start  in  the  best  sales  market.  After  the  business  was 
thoroughly  developed  and  a  strong  sales  department  or- 
ganized, they  could  afford  to  select  a  new  location.  Un- 
der such  conditions  the  old  site  could  be  used  as  a  branch 
factory.  Places  where  buyers  congregate  afford  nat- 
ural advantages  for  a  business  just  starting. 

Taking  the  furniture-manufacturing  business,  for  ex- 
ample, we  find  tliat  buyers  congregate  at  Grand  Rapids 
in  the  summer  and  winter  at  predetermined  dates  to 
inspect  new  styles.  Permanent  furniture  expositions  are 
also  conducted  in  Chicago,  New  York,  St.  Louis,  and  San 
Francisco.  A  new  furniture  business  might  well  con- 
sider carefully  the  advantages  due  to  nearness  to  that 


Locating  an  Industry  39 

one  of  these  markets  in  which  it  proposes  to  conduct  its 
strongest  selling  campaigia. 

Nearness  to  other  establishments  in  similar  lines  is 
also  often  of  advantage.  Buyers  from  various  parts  of 
the  world  come  to  Cincinnati  to  inspect  machine  tools. 
Numerous  small  concerns  building  specialties  in  the  ma- 
chine-tool line  have  as  a  consequence  found  it  advan- 
tageous to  start  in  Cincinnati. 

Local  Site 

Having  determined  on  the  particular  town  in  which  the 
industry  is  to  be  located,  the  selection  of  the  local  site 
is  one  of  equally  great  importance.  There  must  be  room 
for  expansion,  and  at  the  same  time  the  fixed  charges  due 
to  interest  on  the  investment  in  land  and  taxes  must 
not  be  too  high. 

LocAii  Labor  Market 

A  fluctuating  force  of  employes  is  always  a  severe  han- 
dicap. A  location  which  attracts  permanent  w^orkers 
rather  than  '* floaters"  is  to  be  sought.  Most  employes 
do  not  like  long  rides  on  street  cars  or  on  commuters' 
trains.  Hence,  a  location  near  the  homes  of  people  who 
would  form  the  working  force  of  the  business  is  desir- 
able. Nearness  to  the  working-men's  homes  makes  it 
easier  to  develop  athletic  and  social  activities  fostering 
the  personal  relationship  and  personal  interest  in  the 
business. 

Local  Transportation  Facilities 

If  the  factory  is  to  be  a  place  to  which  prospective  cus- 
tomers are  to  be  brought,  the  question  of  local  transporta- 
tion service  is  important.  There  is  always  also  a  con- 
siderable proportion  of  the  employes  who  will  have  to 


40  Organization  and  Management 

be  drawn  from  localities  other  than  the  immediate  neigh- 
borhood of  the  jDlant  or  the  area  within  walking  distance. 
Hence,  good  street-car  or  accommodation  train  service  is 
necessary. 

From  the  viewpoint  of  greatest  advantage  in  freight 
transportation,  it  is  desirable  to  be  located  at  the  inter- 
section of  several  railroads  or  on  a  belt-line,  and  in  a 
locality  where  teaming  or  auto-truck  service  to  other 
depots  is  not  a  heavy  expense  charge. 

Neaeness  to  Local  Trade  Centers 

If  the  industry  is  of  an  assembling  nature  requiring 
the  purchase  of  small  items  of  raw  material,  or  purchased 
finished  parts  on  short  notice,  then  it  is  important  that 
the  site  be  near  local  sources  of  supply  of  such  items, 
as  remoteness  would  cause  delays. 

Fire  Prevention,  Water  Supply,  and  Sanitation 

A  suburban  site  is  frequently  remote  from  good  fire- 
department  apparatus,  and  the  cost  of  installing  and 
maintaining  a  fire-prevention  system  must  be  considered. 
Similarly,  adequacy  of  water-pipe  lines  and  sewers  and 
cost  of  installing  private  lines  need  consideration. 

Industrial  Surveys 

In  order  to  aid  business  men  contemplating  location 
in  a  given  industrial  center,  we  frequently  find  boards 
of  trade,  commercial  clubs,  or  municipal  commissions 
employing  expert  industrial  engineers  to  prepare  what 
have  been  designated  as  ''industrial  surveys."  Such 
surveys  report  on  the  nature  of  the  leading  indus- 
tries in  the  locality  in  question,  the  number  of  persons 
employed,  amount  of  money  invested,  bulk  and  value  of 
output,  to  what  points  the  output  is  shipped,  advantages 


Locating  an  Industry  41 

of  the  town  or  city  in  question  as  regards  some  or  all 
of  the  foregoing-  considerations  discussed  in  this  chapter. 
Such  surveys  are  also  used  to  set  forth  opportunities 
for  certain  lines  of  industry  which  appear  to  exist  ac- 
cording to  the  opinions  of  the  persons  making  the  survey. 
Industrial  surveys  are  taking  the  place  of  hai:)hazard 
solicitation  of  new  industries.  They  afford  just  the  data 
needed  by  the  directors  of  industries  seeking  a  new  loca- 
tion. 

Incidentally,  industrial  surveys  serve  another  very 
useful  purpose,  namely,  that  of  helping  bureaus  for  voca- 
tional gTiidance  in  connection  with  public-school  systems 
or  private  social  efforts,  and  assisting  young  people  to 
get  a  view  of  the  local  field  of  employment. 


TEST  QUESTIONS 

1.  What  are  the  principal  factors  that  enter  into  the  selection 
of  a  certain  town  as  a  desirable  location  for  an  industry? 

2.  When  the  town  is  decided  upon,  what  considerations  affect 
the  selection  of  the  local  site  ? 

3.  Under  what  conditions  is  nearness  to  raw  materials  desir- 
able? 

4.  In  what  classes  of  business  is  power  an  important  factor? 

5.  Discuss  the  influence  of  climate  on  the  selection  of  factory 
location. 

G.  How  may  we  secure  good  transportation  service? 

7.  Under  what  conditions  is  water  transportation  advan- 
tageous ? 

8.  How  does  the  question  of  labor  supply  affect  factory  loca- 
tion ? 

9.  How  may  a  progressive  young  town  in  a  favorable  indus- 
trial location  finance  the  offering  of  free  factory  sites  including 
bonuses,  buildings,  or  stock  subscriptions? 


42  Organisation  and  Management 

10.  How  may  railroads  and  navigation  companies  assist  in- 
dustries as  well  as  towns  along  their  systems  in  the  way  of  fac- 
tory location? 

11.  How  do  local  financial  conditions  affect  the  selection  of  a 
town  for  a  factory  location  ? 

12.  Under  what  conditions  is  it  desirable  to  locate  in  or  close 
to  the  sales  market  ? 

13.  How  does  local  labor  supply  affect  the  selection  of  a  fac- 
tory site  in  a  given  city? 

14.  How  does  the  question  of  local  transportation  facilities 
affect  the  selection  of  a  factory  site  in  a  given  city? 

15.  How  does  nearness  to  local  trade  centers  influence  the 
selection  of  a  factory  site? 

16.  Wliat  influence  do  questions  relating  to  fire  prevention, 
water  supply,  and  sewage,  have  on  the  selection  of  a  local  site  ? 

17.  What  is  an  industrial  survey? 

18.  How  can  an  industrial  survey  be  made  useful  in  connec- 
tion with  educational  policies? 

19.  How  can  an  industrial  survey  be  made  of  use  to  local 
industries? 

20.  What  sort  of  educational  training  and  experience  would 
you  consider  necessary  for  a  person  who  is  to  act  as  industrial 
agent  or  adviser  in  questions  of  factory  location  ? 


CHAPTER  IV 
manufacturing  plants  and  equipment 

Importance  op  Aeeangement  and  Equipment 

Many  successful  industries  had  their  beginnings  in 
rented  quarters  or  in  small  buildings  not  planned  with 
any  particular  reference  to  production.  As  these  in- 
dustries grew  and  a  careful  analysis  was  made  of  costs 
of  production,  it  became  evident  that  the  influence  of 
the  arrangement  of  buildings,  departments,  and  equip- 
ment on  costs  of  production  was  very  important.  The 
realization  of  the  economic  importance  of  these  factors 
has  led  successful  manufacturers  to  considerable  expen- 
ditures in  money  and  time  in  making  careful  lay-outs  of 
industrial  plants  for  the  purpose  of  starting  a  new  one, 
for  making  extensions,  or  looking  to  removal  from  an 
old  site  to  a  new  one. 

This  same  recognition  of  the  importance  of  the  prob- 
lems involved  has  led  to  the  rise  of  a  class  of  industrial 
engineers,  some  of  them  acting  as  designers,  others  as 
designers  and  contractors,  who  make  a  specialty  of  the 
lay-out,  design,  equipment,  and  sometimes  the  initial 
operation  of  industrial  plants. 

Principal  Factors  to  be  Considered  in  Plant  Lay-out 

The  controlling  influences  in  arranging  and  designing 
industrial  plants  are  (1)  processes  and  (2)  service. 

43 


44  Organisation  and  Management 

Under  the  heading  of  processes  we  shall  have  to  con- 
sider (a)  the  general  process-mapping  of  the  industry; 
(b)  the  routing  of  the  separate  classes  of  material  or 
parts  through  the  establishment  as  a  whole  and  through 
each  distinct  department;  (c)  machinery  and  fixtures  in- 
volved in  industrial  processes;  (d)  departmental  ar- 
rangement by  processes. 

Under  the  heading  of  service  we  shall  have  to  consider 
the  following:  (a)  power;  (b)  heat;  (c)  ventilation;  (d) 
light;  (e)  sanitation;  (f)  transportation;  (g)  storage 
of  (1)  raw  materials,  (2)  work  in  process,  (3)  finished 
individual  parts,  (4)  assembled  groups,  and  (5)  com- 
pletely finished  product;  (h)  receiving  and  shipping;  (i) 
tool  rooms;  (j)  wash  rooms;  (k)  foremen's  offices;  (1) 
spaces  for  planning  department,  bulletin  boards,  time 
clocks,  cost  and  stores  records,  etc.;  (m)  inspectors' 
quarters;  (n)  fire-prevention,  safety,  and  welfare  ar- 
rangements; (o)  drafting  and  designing  space;  (j)  com- 
mercial, administrative,  and  supervisional  officials'  of- 
fices. 

Process-Mapping 

Process-mapping  consists  of  the  charting  of  the  gen- 
eral processes  involved  in  the  industry.  Naturally,  ana- 
lytic manufacturing  would  present  a  different  type  of 
process-mapping  from  that  of  synthetic  manufacturing. 
Similarly,  an  industry  employing  consecutive  processes 
would  present  an  entirely  different  process-mapping  from 
that  of  an  industry  in  which  simultaneous  processes  are 
the  rule.  For  instance,  a  linseed-oil  factory  is  an  ex- 
tractive or  analytic  industry  and  would  require  an  en- 
tirely different  process-map  from  the  one  needed  by  a 
cement  mill,  which  is  a  synthetic  industry.  Again,  a  rail, 
mill  is  a  continuous  process  and  requires  entirely  differ- 


Plants  and  Equipment  45 

ent  process-maps  from  those  of  a  sewing-machine  fac- 
tory, which  typifies  simultaneous  processes  followed  by 
assembling. 

Preliminary  general  process-maps  can  be  made  for  a 
given  industry  by  listing  first  the  general  operations.  If 
these  are  all  consecutive,  we  shall  have  the  list  in  one 


CLEANING 


GRINDING 


SCREENING 


PURIFYING 


PACKING 


SHIPPING 


Fig.  10. — Lay-out  of  a  Flour  Mill,  Illustrating  an  Analytic  Industry  with 
Consecutive  Processes,  Located  in  a  Single  Multifloor  Building 


column.  If  some  are  simultaneous,  they  will  be  in  several 
columns.  Then  we  can  decide  definitely,  from  our  knowl- 
edge of  the  processes,  which  of  them  require  separate 
buildings  and  which  can  be  housed  together,  also  which 
processes  must  be  on  the  ground  floor  and  which  may  be 
on  upper  floors.  For  example,  it  is  easy  to  decide  that 
painting  agricultural  machinery  by  the  dipping  process 


46  Organization  and  Management 

should  be  in  a  separate  building  from  the  machine  work 
on  the  metal  parts,  and  that  assembling  large  boilers 
must  be  done  on  the  ground  floor. 

We  can  now  roughly  sketch  a  phantom-perspective  view 
of  a  building  or  group  of  buildings  devoted  to  process- 
ing, for  the  present  omitting  power-plant  and  all  service 


RAW 
MATERIAL 

ROLLS 

STAMPS 

CONCEN- 
TRATORS 

TANKS 

GRINDERS 

SETTLING 

AND 
CLEANING 

Fig.  11. — Lay-out  of  an  Ore  Mill,  Illustrating  an  Analytic  Industry  with 

Consecutive  Processes,  Located  on  a  Hillside  to  Take 

Advantage  of  Gravity 


equipment.  We  may  indicate  in  colored  crayons  or  col- 
ored inks  the  various  principal  processes  and  the  paths 
for  the  flow  of  materials,  supplies,  and  work  in  process, 
as  well  as  by-products  and  waste,  if  any.  Figures  10, 
11,  12,  and  13  are  simple  forms  of  preliminary  process- 
maps. 


Plants  and  Equipment  47 

Routing  Individual  Pakts  or  Classes  of  Material 

Routing  is  different  from  process-mapping  in  that  it 
traces  the  path  of  a  single  part.  For  instance,  in  making 
a  process-map  for  an  automobile  factory,  we  have  before 
us  an  entirely  different  task  from  that  required  if  we 


OFFICE 


DRAFTING  ROOM 


TEMPLET     SHOP  AND  ROUGH  STOCK 


SHEARS 


PLANERS 


RIVETERS 


FINISHED  STOCK 


Fig.  12. — Lay-out  of  a  Structural  Steel  Plant,  Illustrating  a  Consecutive- 
Process  Synthetic  Industry 

route  a  crank  case  to  be  made  in  that  same  factory.  To 
route  the  crank  case,  we  inspect  the  blue-print  and  list 
the  separate  operations  to  be  done.  Process-mapping  is 
a  generalized  survey  of  the  whole  industry.     Routing 


48 


Organization  and  Management 


GENERAL  ASSEMBLY 

1 

PATTERN 
""               SHOP 

^ 

^          rni  iMHRV 

if 

^               rUUiNL>/I\.  I 

BOILER 

^m-»» 

SHOP 

FORGE 

SHOP 

MACHINE 

% 

SHOP 

n 


Fig.  13. — Lay-out  of  a  Locomotive  Shop,  Illustrating  a  Synthetic  Industry 
with  Simultaneous  Processes,  FoUowed  by  General  Assembly 


Plants  and  Equipment 


49 


is  a  detailed  investigation  which,  when  thoroughly  built 
up,  may  materially  modify  preliminary  process-mapping. 
A  well-organized  system  of  routing  and  a  good  stock  of 
routing  records  covering  the  product  form  the  very  best 
basis  for  an  intelligent  process-map.  Of  course,  in  start- 
ing an  entirely  new  industry  the  experience  and  judg- 
ment of  the  men  in  charge  of  the  productive  end  of  the 


P»n          BOX    -    RAHIC                               SU.   ] 

1 

1      1-1/2 

■     C»rd  No.      269 

r  Un, 

1 

OPERATION 

SYMBOU 

MIna.  each 

REMARKS 

1  Bore  &  Turn   (Outs.   &  ins.) 

B  &  T 

21.6 

2  Koyway  for  babbitt 

Kl 

17 

3  Babbitt 

B40 

50 

4  Bore    (Roll  babbitt  &  OilRroove! 

B 

23.5 

5  Turn 

T 

35 

Fig.  14. — Typical  Routing  Card  Giving  Operations  to  be  Performed  on  Each 

Piece 

Mnemonic   (symbols  for  operations  are  jrenerally  used   on  all  shop  tags  and  cost 
cards,  tlius  saving  time  and  space. 

enterprise  form  the  only  basis  for  process-mapping.  Fig- 
ure 14  is  a  typical  routing  card  giving  the  operations  to 
be  performed  on  an  individual  part. 

Selection  and  Arrangement  of  Machinery 
AND  Fixtures 
After  having  laid  out  the  preliminary  general  process- 
map,  it  is  desirable  to  take  a  large  sheet  of  drawing- 


50  Organization  and  Management 

paper  for  each  separate  department  and  indicate  roughly 
the  most  prevalent  routes  of  material,  parts  in  process, 
and  supplies,  by-products,  and  waste  through  this  de- 
partment. Knowing  the  capacity  of  output,  we  must  next 
determine  how  many  units  of  processing  machinery  or 
devices  are  to  be  placed  in  the  department,  and  of  what 
capacity  each  must  be.  We  are  going  on  the  assumption 
now  that  w^e  have  not  restricted  the  confines  of  the  de- 
partment by  any  room  or  building  walls,  but  are  going 
to  make  the  building  and  rooms  suit  the  processes.  We 
can  be  guided  by  the  number  of  units  and  capacity  of 
processing  machinery  and  devices  for  a  given  quantity  of 
output  used  in  similar  establishments  elsewhere,  if  such 
data  are  available.  If  they  are  not,  it  becomes  necessary 
to  estimate  the  time  required  for  processing  each  part 
and  for  providing  the  necessary  number  of  units  of  proc- 
essing machinery  to  furnish  the  output  wanted  in  a  given 
time. 

We  next  investigate  the  floor  area  required  by  each 
processing  machine  or  device  and  its  dimensions  together 
with  space  required  around  it  for  operators  and  storage. 
We  must  also  allow  room  for  free  transportation  by 
truck,  wheelbarrow,  industrial  railway,  or  crane,  as  well 
as  room  for  expansion  by  the  placing  of  an  additional 
processing  unit  in  the  future  in  the  most  desirable  loca- 
tion, provided  there  is  any  likelihood  of  such  expansion, 
any  floor  space  available,  and  the  allowance  of  such  space 
does  not  increase  cost  of  production. 

In  arranging  the  various  machines  and  fixtures,  it  is 
very  convenient  to  cut  out  forms  or  templets  to  scale 
so  as  to  represent  the  floor  space  occupied  by  the  various 
machines  and  fixtures.  The  name  of  the  equipment  and 
horse-power  required,  together  with  dimensions,  should 
be  written  on  the  templet.    These  templets  are  then  ar- 


=m 


open  ru-  -^irer 


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Plants  and  Equipment  51 

ranged  and  re-arranged  until  the  most  satisfactory  col- 
location in  the  department  has  been  reached,  whereupon 
they  are  fastened  with  tacks  to  the  paper  or  board  repre- 
senting the  department.  Figure  15  is  an  example  of  a 
plant  lay-out  arrived  at  by  use  of  templets  as  indicated. 

Departmental  Arrangement  by  Processes 

The  foregoing  investigation  will  give  sufficient  infor- 
mation on  which  to  base  approximate  dimensions  for  the 
leading  processing  departments.  It  is  desirable  to  have 
data  available  from  similar  establishments  giving  the 
square  feet  per  department  per  unit  of  output  and  per 
employe.  Such  data  are  useful  for  comparison.  We  now 
are  in  a  position  to  cut  out  templets  on  a  smaller  scale 
than  the  large  sheets  representing  departments,  a  templet 
for  each  department,  and  can  arrange  the  departments 
in  most  advantageous  relation  to  each  other  so  far  as 
processing  is  concerned.  Before  deciding  anything  defi- 
nite, however,  we  have  next  to  consider  the  space  and 
location  requirements  of  the  service  equipment  and  serv- 
ice departments. 

Power-Generation  and  Transmitting-Apparatus 

It  has  already  been  suggested  that  the  horse-power 
should  be  listed  on  each  templet  representing  processing 
machinery.  We  cannot  designate  the  motor  required  for 
each  department  nor  the  power  required  for  the  plant  as 
a  whole  until  we  have  investigated  certain  other  power- 
consuming  service  apparatus  connected  with  heat,  ventila- 
tion, light,  and  transportation.  It  is  therefore  the  last 
item  to  be  considered. 


62  Organization  and  Management 

Heating,  Ventilating,  Humidifying,  and 
Air- Washing  Apparatus 

This  part  of  the  plant  is  entirely  too  important  as  an 
economic  factor  in  production  to  be  left  to  an  inexpe- 
rienced architect  or  to  a  local  pipe-fitting  contractor. 
Unless  there  is  experienced  engineering  skill  available 
among  the  employes  of  the  establishment,  this  matter 
as  well  as  the  entire  question  of  factory  specifications 
should  be  left  to  an  experienced  industrial  engineer. 
However,  it  is  necessary  for  everyone  connected  with 
shop  management  in  any  form  to  appreciate  the  im- 
portance of  the  principles  involved.  For  this  reason  the 
discussion  has  been  introduced  here. 

Direct  radiation  arises  from  the  running  of  pipes  con- 
taining steam  or  hot  water  into  the  rooms  and  spaces  to 
be  heated,  and  running  these  pipes  either  overhead,  along 
the  walls,  or  fastening  them  to  radiators.  Where  direct 
radiation  is  used  in  factories  there  should  be  a  system 
of  controlling  the  circulation  of  the  steam  and  condensed 
water  by  other  means  than  gravity,  as  the  long  distances 
involved  usually  interfere  with  the  success  of  the  gravity 
return  system.  Direct  radiation  is  preferred  by  many 
shop-owners  to  a  hot-blast  system,  because  it  costs  a  little 
more  to  heat  the  air  and  blow  it  through  the  establish- 
ment than  it  costs  to  install  direct  radiation.  However, 
where  direct  radiation  is  used,  it  should  be  accompanied 
by  a  suction  foul-air  exhaust  system  arranged  to  remove 
the  vitiated  air  at  a  proper  rate.  Such  a  system  consists 
of  ventilating  flues  in  the  walls  connected  with  a  central 
flue,  at  the  top  of  which  is  a  suction  fan  of  required  ca- 
pacity. 


Plants  and  Equipment  53 

Advantages  of  Hot-Blast  System 

The  hot-blast  system  has  advantages  from  a  hygienic 
standpoint  that  make  it  well  worth  the  slight  additional 
cost  over  that  of  the  direct  radiation  system.  There  is 
always  plenty  of  fresh  air,  if  the  supply  of  air  to  be 
warmed  is  pure.  This  air,  on  being  forced  out  from 
the  hot-air  flue,  penetrates  in  all  directions  and  is  better 
circulated  than  the  air  heated  by  direct  radiation,  even 
with  the  aid  of  foul-air  ducts  and  an  exhaust  fan.  The 
ventilating  ducts  and  exhaust  fan  are  also  used  in  con- 
nection with  the  hot-blast  system. 

The  greatest  advantage  of  the  hot-blast  system,  how- 
ever, and  one  appreciated  only  within  recent  years,  lies 
in  the  fact  that  we  can  by  it  control  not  only  the  tempera- 
ture of  the  air  supplied,  but  also  its  humidity.  The  lassi- 
tude of  workers  confined  in  buildings  has  been  found  to 
be  largely  due  to  the  dryness  of  the  air.  This  same  dry- 
ness makes  us  demand  a  higher  temperature.  Air  at 
proper  humidity  and  at  a  temperature  of  63°  Fahren- 
heit is  as  comfortable  as  dry  air  at  TO"".  Hence,  we  can 
save  coal  in  our  heating-plant  and  insure  freedom  from 
colds  and  from  catarrhal  and  grippe  troubles  by  humidi- 
fying our  air.  Humidifying  apparatus  is  now  sold  by 
the  manufacturers  of  all  mechanical  heating  appliances 
and  is  becoming  so  generally  used  that  no  progressive 
industrial  establishment  can  afford  to  be  without  it,  as 
it  is  a  most  important  economic  factor  in  bettering  the 
health  of  employes  and  thus  securing  greater  content- 
ment and  bigger  output. 

So  far  as  department  lay-out  is  concerned,  the  only 
way  in  which  the  heating  and  ventilating  apparatus  en- 
ters is  in  the  matter  of  locating  radiators  and  registers 
or  ducts.     These  locations  should  be  indicated  in  their 


54  Organization  and  Management 

preferred  positions,  so  that  these  may  be  conformed  to 
as  near  as  possible  in  the  installation. 

Light 

Provision  should  be  made  for  abundant  daylight.  The 
use  of  metal  sash  enables  us  to  make  the  window  frame 
of  strong,  light  material.  Where  the  light  must  pene- 
trate more  than  twenty  or  twenty-five  feet  into  floors  hav- 
ing a  height  of  only  ten  or  twelve  feet,  it  is  desirable  to 
introduce  prismatic-glass  panes  into  the  upper  sections 
of  the  window  sash.  Where  multifloor  construction  is 
used  with  widths  of  floors  of  more  than  sixty  feet  it  may 
be  necessary  to  introduce  artificial  lighting  in  the  day- 
time. The  tendency  is  all  in  favor  of  the  reflected  light 
or  ''full  indirect"  type  of  chandelier  presenting  an 
opaque  surface  to  the  eye  and  reflecting  the  light  to  a 
diffusing  ceiling. 

Ordinaiy  illumination  for  rough  work  demands  an 
intensity  of  light  of  not  less  than  one  foot-candle,  which 
means  that  the  light  is  the  same  as  would  be  given  on  a 
sheet  of  paper  a  foot  distant  from  a  standard  candle. 
For  reading  purposes,  an  intensity  of  two  foot-candles 
is  required,  and  for  accurate  machine  work  three  foot- 
candles  are  requisite. 

The  spacing  of  the  lights  and  their  height  from  the 
floor  and  below  the  reflecting  ceiling  must  be  determined 
by  calculation.  In  single-floor  buildings  more  than  fifty 
feet  wide  the  saw-tooth  roof  with  northerly  exposure 
gives  us  good  daylight  illumination.  However,  unless 
level  reflecting  surfaces  are  provided,  the  full  indirect 
reflecting  system  cannot  be  used  with  a  saw-tooth  roof, 
and  a  translucent  glass  is  used  under  the  chandelier  in- 
stead of  a  reflecting  opaque  type.  This  is  known  as  the 
''semi-indirect   system."    The   drop   cord   with   unpro- 


Plants  and  Equipment  55 

tected  glaring  filament  is  absolutely  obsolete  so  far  as 
intelligent  illumination  is  concerned.  It  is  a  source  of 
eye-strain  and  fatigue  which  materially  interferes  with 
efficiency  of  production. 

Wash  and  Locker  Rooms 

It  would  be  better  if  these  rooms  were  distributed 
about  the  plant  instead  of  being  concentrated  in  one  lo- 
cation. Such  distribution  saves  the  time  of  employes 
who  are  compelled  to  use  them  during  working  hours. 
Departmental  arrangement  must  provide  for  such  rooms 
in  convenient  locations. 

Transportation 

We  must  allow  room  for  the  easy  passage  of  trucks 
as  well  as  a  storage  room  for  trucks  not  in  use.  We  must 
also  provide  for  modern  elevating  trucks  loaded  with  ma- 
terial. If  the  storage-battery  type  of  motor-driven  trucks 
is  to  be  used,  provision  must  be  made  for  their  storage 
and  maintenance.  If  industrial  railways  are  to  be  used, 
space  must  be  allowed  for  tracks  and  turn-tables.  Room 
must  also  be  allowed  for  trolley  systems,  hoists,  and  over- 
head cranes,  if  it  is  found  that  they  are  requisite. 

Store  Rooms 

Storage  of  raw  materials,  work  in  process,  finished  in- 
dividual parts,  assembled  groups,  and  completely  fin- 
ished product  must  be  provided  for  by  allowing  space 
for  such  storage  wherever  needed.  The  store  rooms  re- 
quire proper  equipment  in  the  way  of  bins,  racks,  shelves, 
etc.,  to  insure  ready  accessibility  as  well  as  safety  against 
damage  and  theft.  The  working  part  of  the  shop  should 
n.ot  be  interfered  with  by  any  attempt  to  combine  store- 
room functions  with  prbc^sing  activities. 


56  Organization  and  Management 

Receiving  and  Shipping 

The  receiving  department  may  be  under  the  same  juris- 
diction as  the  purchasing  and  stores,  or  under  the  ship- 
ping department.  In  any  event  its  location  is  likely  to 
be  most  favorably  determined  when  we  consider  its  own. 
functions  irrespective  of  what  other  department  it  may 
be  under,  so  far  as  jurisdiction  is  concerned.  If  most  of 
the  small  materials  are  received  by  team  or  express,  it 
may  be  desirable  to  have  it  located  where  such  teams 
can  most  conveniently  arrive,  unload,  turn  around,  and 
depart.  Both  receiving  and  shipping  must  be  convenient 
to  the  store  rooms.  Receiving  will  probably  have  to  be 
nearer  the  raw-material  stores,  and  shipping  will  have  to 
be  nearer  the  finished-product  stores.  In  case  carload  re- 
ceipts and  shipments  are  only  occasional  and  there  is  but 
one  track,  this  track  will  have  to  be  accessible  to  both 
receiving  and  shipping  departments  and  a  clear  passage- 
way to  it  from  both  of  these  departments  will  have  to  be 
provided.  If  coal  and  ashes  in  carload  lots  constitute  a 
considerable  factor,  these  items  will  also  have  to  be  con- 
sidered in  laying  out  the  trackage. 

Tool  Rooms 

Tool-making  and  tool-storage  are  distinct  functions 
and  must  not  be  confused.  Tool  storage  and  delivers^' 
may  require  a  messenger-boy  service,  a  pneumatic-tube 
service,  a  cable-driven  basket  service,  or  a  dumb-waiter 
service,  as  well  as  supplementary  storage  and  delivery 
rooms. 

Foremen's  Offices 

Where  the  foreman  is  a  working  gang  boss  he  will 
probably  not  need  any  desk  room.  However,  there  ape 
industries  which,  even  when  pro\'ided  with  a  planning 


Plants  and  Equipment  57 

department,  require  that  certain  foremen  may  have  pri- 
vacy for  studying  blue-prints  and  specifications  and  for 
interviews.  The  clerical  help  of  foremen  must  always 
be  kept  at  a  minimum.  AVliere  a  private  office  for  a  fore- 
man is  in  the  interests  of  efficiency,  it  must  be  provided 
for  and  space  allowed  for  it. 

Planning-Depaetment  Fixtubes 

A  planning  department  usually  requires  the  allowance 
of  room  for  bulletin  boards  on  which  are  listed  the  jobs 
to  be  worked  on  by  each  man  in  a  department  or  sub- 
department.  This  means  that  the  floor  around  this 
bulletin  board  must  be  kept  clear  and  preferably  fenced 
off  by  pipe. 

Inspectors'  Quarters 

Space  will  have  to  be  allowed  for  inspectors  as  well 
as  for  benches  and  appliances,  accommodating  as  much 
work  in  process  as  is  likely  to  accumulate  in  such  space. 
In  some  establishments  inspection  takes  place  only  prior 
to  turning  a  piece  into  the  stock  room  for  finished  parts. 
Under  such  conditions  only  one  space  is  required  for 
inspectors.  In  other  establishments  inspection  takes  place 
at  more  frequent  intervals  and  in  various  parts  of  the 
shop;  in  such  cases  the  inspectors'  quarters  must  be  lo- 
cated so  as  to  cause  least  delay  in  the  progress  of  ma- 
terials. 

Fire-Prevention,  Safety,  and  Welfare  Arrangements 

The  location  of  hose  attachments,  hose,  chemical 
extinguishers,  fire  escapes,  belt  guards,  and  any  other 
safety  devices  taking  up  space,  will  have  to  be  taken  into 
consideration.     Among  welfare  arrangements  those  re- 


58  Organization  and  Management 

quiring  space  are  such  as  hospitals,  rest  rooms,  physi- 
cian's ofiSce,  lunch  rooms,  library,  and  assembly  room. 

Drafting  and  Designing  Space 

The  drafting  and  designing  space  must  be  located 
where  it  has  the  advantage  of  good  daylight,  and  as 
nearly  as  possible  situated  at  an  equal  distance  from  the 
commercial  and  sales  offices,  the  main  planning-depart- 
mcnt  office,  the  pattern  and  drafting  department,  and  the 
main  inspection  office.  The  resulting  location  is  usually 
something  of  a  compromise. 

Commeecial  Offices 

The  commercial  offices  used  for  administrative  and 
supervisional  officers  should  be  arranged  in  such  a  manner 
that  visitors  to  the  purchasing  department,  accounting 
department,  applicants  for  positions,  and  prospective 
customers  can  be  directed  into  separate  waiting  rooms. 
The  internal  arrangement  of  the  commercial  offices  should 
be  made  the  subject  of  as  careful  a  lay-out  as  the 
arrangement  of  the  factory  equipment  and  productive 
departments. 

Final  Akrangement 

After  having  indicated  on  the  preliminary  separate 
departmental  sheets,  and  also  on  a  large  preliminary 
general  lay-out,  the  location  of  all  the  service  equipment 
and  service  departments,  we  are  now  ready  to  make  the 
final  lay-out.  This  lay-out  can  be  visualized  more  cx)m- 
pletely  by  means  of  a  wooden  model  built  to  the  scale 
of  the  proposed  factory  buildings,  but  showing  the  side 
walls  in  framing  only  and  having  the  floors  solid.  On 
the  floors  are  fastened  (with  pins)  templets  showing  the 
various  equipments,  deprartmBntal  bonndarifes  being  indi- 


Plants  and  Equipment  59 

cated  by  painted  lines.  The  principal  paths  of  progress 
of  material,  as  determined  by  the  preliminary  process- 
mapping,  are  inrlicated  by  the  use  of  threads  of  various 
colors.  Figure  16  shows  the  ground-floor  plan  for  a 
gas-engine  manufacturing  plant,  which  has  been  arrived 
at  by  cutting  out  templets  representing  various  depart- 
ments and  arranging  them  until  the  most  satisfactory 
collocation  has  been  secured. 


TEST  QUESTIONS 

1.  What  four  groups  of  considerations  are  involved  in  study- 
ing processes  as  related  to  plant  lay-out? 

2.  What  features  are  to  be  considered  under  the  heading  of 
service  ? 

3.  What  is  process-mapping? 

4.  Make  a  graphical  process-map  for  some  simple  industry 
with  which  you  are  familiar. 

5.  What  is  routing,  and  how  does  it  differ  from  process-map- 
ping? 

6.  What  considerations  enter  into  the  arrangement  of  sur- 
rounding floor  space  for  process  machinery  and  fixtures  in  a 
given  department? 

7.  Of  what  use  are  paper  templets  of  machines  and  fixtures 
in  making  a  department  lay-out? 

8.  What  comparative  statistical  data  are  desirable  in  de- 
termining the  area  of  various  departments  ? 

9.  How  may  paper  templets  be  used  in  determining  depart- 
mental arrangement? 

10.  What  arrangements  should  be  made  for  controlling  the 
circulation  of  steam  in  radiators  and  for  the  removal  of  foul  air 
when  a  direct  radiation  heating  system  is  used  in  a  factory? 

11.  What  are  the  advantages  of  a  plenum  hot-blast  system? 

12.  What  arrangements  should  be  made  fdr  abundant  daylight 
iUumination  ? 


60  Organization  and  Management 

13.  What  is  meant  by  a  foot-candle  of  illumination? 

14.  Wliat  intensity  of  artificial  illumination  is  required  for 
reading  purposes?    For  accurate  machine  work? 

15.  Discuss  the  injurious  effects  of  glare  and  state  how  they 
may  be  avoided. 

16.  What  considerations  are  involved  in  the  design  of  wash 
and  locker  rooms,  store  rooms,  and  tool  rooms? 

17.  What  provision  must  be  made  for  transportation  of  various 
sorts  ? 

18.  What  considerations  are  involved  in  locating  receiving 
and  shipping  department,  foremen's  offices,  inspectors'  quarters? 

19.  What  considerations  are  involved  in  locating  fire-preven- 
tion and  safety  apparatus,  drafting  and  designing  space,  and 
commercial  and  administrative  offices? 

20.  How  may  the  final  arrangement  be  visualized  in  the  most 
striking  manner? 


CHAPTER  V 

BUYING 

Qualifications  of  a  Purchasing  Agent 

The  purchasing  agent's  activities  involve  almost  all 
of  the  production  factors  enumerated.  He  has,  of  course, 
to  deal  primarily  with  materials  and  the  markets  for 
these  materials.  In  his  contact  with  salesmen  and  sup- 
pliers of  materials  he  must  deal  with  men.  In  knowing 
his  financial  limits  he  has  to  deal  with  money.  In 
devising  good  systems  and  running  his  department 
economically  he  has  to  do  with  methods.  It  is  quite 
apparent,  therefore,  that  he  must  be  a  versatile,  broad- 
gage  man.  He  is  probably  the  most  important  official 
next  to  the  general  manager  and  works  manager. 

It  is  important  that  an  assistant  or  substitute  for  the 
purchasing  agent  be  under  training  in  every  well- 
organized  business.  While  such  an  assistant  may  not, 
before  he  has  had  sufficient  training  or  experience,  be 
ready  to  take  the  purchasing  agent's  position  in  case  of 
a  sudden  vacancy,  he  can  tide  over  the  intervening  period 
between  the  old  department  head's  time  of  leaving  and 
the  time  required  for  the  new  purchasing  agent  to  become 
acquainted  with  the  business.  In  a  great  many  instances, 
if  the  assistant  has  had  sufiScient  training  and  experience 
and  is  mature  enough,  he  can  be  appointed  to  be  the 
head  of  the  department  in  case  of  a  vacancy. 

61 


62  Organization  and  Management 

Knowledge  of  the  Materials 

Although  the  purchasing  agent  is  not  expected  to 
possess  the  scientific  accuracy  with  regard  to  the  tech- 
nology of  a  business  that  must  characterize  the  chief 
chemist,  chief  engineer,  or  designer,  he  must  have  or 
acquire  a  knowledge  of  the  industry  and  its  processes, 
so  that  he  can  discriminate  intelligently  in  all  questions 
relating  to  the  materials  and  supplies  he  is  called  on  to 
buy. 

Data  Regarding  Materials 

The  purchasing  department  should  maintain  a  bureau 
of  information  covering  the  sources  of  supply  of  all 
materials  and  supplies  of  the  business.  Such  information 
is  contained  not  only  in  catalogues  of  suppliers,  but  also 
in  text-books,  periodicals,  and  clippings  relating  to  these 
subjects,  as  well  as  in  statistical  data  covering  past  pur- 
chases, the  source  of  these  purchases,  the  quantity  bought, 
and  prices  paid.  The  above  information  is  best  kept  in 
document  cases  or  in  some  of  the  various  proprietary 
styles  of  filing  cases  designed  to  hold  catalogues,  circu- 
lars, leaflets,  and  sheets.  A  uniform  style  of  container 
is  advisable.  A  mnemonic  system  of  classification  is  rec- 
ommended. 

A  mnemonic  system  is  one  in  which  certain  classes  of 
subjects  are  designated  by  abbreviations  selected  so  as  to 
give  a  hint  of  the  word  and  yet  different  enough  from  one 
another  not  to  be  confusing.  As  an  alternative  method 
a  system  like  the  Dewey  Library  system  is  commended,  in 
which  a  certain  number  stands  for  a  certain  subject, 
decimals  signifying  sub-classifications.  For  instance,  in  a 
mnemonic  system  we  might  indicate  vertical  water- tube 
boilers  by  the  symbol  BVWT,  and  all  catalogues,  specifi- 
cations, data,  etc.,  regarding  vertical  water-tube  boilers 


Bwifi/ng 


63 


would  be  found  in  that  section  of  filing  boxes  in  which 
the  boxes  were  marked  ^vith  the  symbol  BVWT,  each 
individual  catalogue,  circular,  or  sheet  being  marked  in 
the  same  manner.  We  should  then  have  two  alphabetical 
finding  indexes,  one  set  arranged  by  names  of  materials 
and  articles,  the  other  being  arranged  by  names  of  firms 
or  authors. 


SUBJECT     Water-Tube  Boilers! Vertical) 

SYMBOL.        ^^^^ 

NAME 

ADDRESS 

CAT. 

Wlckea  Broe . 

Saginaw,   Mich. 

Wil 

Fig.  17. — Index  for  Information  and  Catalogue  File  in  Purchasing 

Department 

Knowing    the    subject,    one    can    locate    the    catalogue,    pamphlet,    or    book    by 
means  of  this  index. 


Figure  17  shows  the  card  for  materials  in  the  finding 
index,  and  Figure  18  the  card  for  names  of  firms  or 
authors  of  papers,  pamphlets,  or  books. 

The  method  of  filing  as  above  outlined  is  much  better 
than  another  frequently  used,  according  to  which  cata- 
logues are  filed,  either  consecutively  or  by  sizes,  as  they 
are  received,  being  designated  by  consecutive  numbers 


64 


Organization  and  Management 


indiscriminately.  It  is  true  that  the  index  cards  under 
such  a  system  will  serve  to  locate  the  catalogues  and  pam- 
phlets. The  method  illustrated  has  the  advantage  of 
keeping  together  all  material  pertaining  to  a  given  sub- 
ject. The  mnemonic  system  or  the  Dewey  decimal  sys- 
tem with  abbreviations  after  the  decimals  to  indicate  the 
name  of  the  author  or  firm,  admits  of  flexibility  in  that 


NAME 

Wlclcea  Bros. 

ADDRESS 

Saginaw,  Uich 

SYMBOL 

CAT. 

ARTICLES 

Water  Tube  Boilers   (Vertical) 

B  V  W  T 

Wl    1 

Fig.   18. — Index  by  Names   of  Firms  or  Authors  for   Purchasing   Depart- 
ment's  Information   and   Catalogue  File 

KnowluK    tbe    name    of    the    firm    or    author,    one    can    locate    the    catalogue, 
pamphlet,   or  book   by  referring  to  this  index. 

the  space  allotted  to  any  subject  may  be  enlarged  as  the 
number  of  catalogues  or  papers  pertaining  to  that  sub- 
ject increases.  The  tests  of  a  good  filing  system  are 
flexibility,  expansibility,  and  ease  of  finding  the  desired 
information. 


Knowledge  of  Markets 

There  are  two  distinct  policies  observed  in  connection 
with  buying.  One  limits  the  purchasing  agent's  activities 
to  the  buving  of  materials  at  such  times  and  in  such 


Buying  65 

quantities  as  requisitions  from  the  departments  author- 
ized by  the  works  manager  to  make  requisitions  may 
specify.  The  other  policy  encourages  the  purchasing 
agent  to  study  the  markets  with  a  view  to  buying  when 
prices  are  low. 

The  first  policy  contends  that  to  buy  when  the  market 
is  low  is  taking  the  purchasing  function  into  the  field  of 
speculation.  Where  production  is  variable  and  diflScult 
to  determine  approximately  in  advance  from  the  basis 
afforded  by  a  comparison  of  past  statistics  with  estimates 
of  the  future,  the  first  policy  is  usually  necessary. 

Where  records  of  former  purchases  and  data  regarding 
orders  in  hand  and  probable  production  of  the  next  six 
months  or  a  year  form  a  reliable  basis  as  to  estimates  of 
material  required  for  this  period,  the  second  policy  of 
encouraging  buying  when  the  market  is  low  is  frequently 
adopted.  This  policy,  when  it  involves  outright  purchase 
in  advance  of  requirements,  means  that  money  must  be 
available  in  the  form  of  cash  on  hand  or  borrowing  ability 
to  provide  for  the  stocking  up,  and  there  must  be  as  well 
storage  room  for  stores  of  materials  thus  bought  in 
advance. 

A  compromise  policy  is  sometimes  feasible  in  buying 
certain  lines.  For  instance,  in  buying  copper  wire,  copper 
and  brass  bar  stock,  steel  and  iron  bar  stock,  and  sheet 
steel,  contracts  can  be  made  calling  for  the  delivery  of  a 
certain  weight  or  tonnage  of  materials  of  these  classes 
within  a  specified  time  at  a  price  a  certain  number  of 
cents  per  pound,  or  dollars  and  cents  per  ton,  over  and 
above  the  current  ''base"  price  of  the  market  value  of 
the  raw  materials,  such  as  ingot  copper  or  steel,  at  the 
time  of  placing  orders,  or  the  average  of  such  ''base" 
price  during  each  month  may  be  stipulated  as  the  basis 
of  price. 


66 


Organizatian  and  Management 
Records  of  Formeb  Purchases 


For  gathering  statistical  data  on  which  to  base  esti- 
mates of  future  requirements  and  money  expenditure 
involved,  it  is  essential  that  a  record  of  former  purchases 
be  kept.     Such  record  should  be  classified  by  materials 


MATERIAL 

Braes  Bars 

SIZE 

1/2"   roiind 

SUPPLIER 

Date  of 
Invoice 

Quantity 
Bought 

Unil 
Pnce 

Total 
Pnce 

Bridgeport  Brass  Co. 

1/15/15 

560   lb 

.18 

67.20 

1    , 

Fig.    19. — Materials-Purchased    Record    Used    as    a    Statistical    Basis    for 

Estimating  Quantities  of  Materials  and  Supplies  Consumed  in  a 

Given  Period  of  Time,  Showing  Also  the  Past  Cost 


and  show  sources,  quantity,  and  prices.  Figure  19  shows 
a  materials-purchased  record  of  this  form,  indexed  by 
materials  and  wdth  a  separate  card  for  each  size  of  mate- 
rial. These  records  are  filled  out  from  current  invoices 
as  they  are  received  by  a  clerk  in  the  purchasing  depart- 
ment, who  is  assigned  to  the  task  of  keeping  up  the  record. 


Buying  67 

Recoed  of  Quotations 

It  is  desirable  to  maintain  records  of  quotations  distinct 
from  records  of  materials  purchased.  The  reasons  for 
keeping  such  a  quotation  record  are:  (1)  It  affords  in 
compact  form  the  names  of  firms  that  have  made  quota- 
tions in  the  past  and  from  whom  quotations  can  be  secured 
again  for  the  material  under  consideration;  (2)  it  serves 
as  a  proof  to  show  that  competitive  prices  were  secured. 

The  quotation  record  may  be  kept  on  cards  or  loose 
leaves  ruled  in  a  manner  similar  to  that  of  the  record  of 
materials  purchased  shown  in  Figure  19,  the  only  differ- 
ence being  that  in  the  case  of  quotations  there  will  usually 
not  be  so  many  detailed  sizes  and  styles  as  in  the  record 
of  actual  purchases. 

The  Human  Element  in  Buying 

It  goes  almost  without  saying  that  the  buyer  must  be 
on  friendly  terms  with  the  suppliers  and  their  representa- 
tives. Hence,  a  purchasing  agent  cannot  afford  to  be 
haughty  or  ' '  grouchy, ' '  nor  should  he  be  too  busy  to  see 
salesmen.  He  certainly  cannot  give  every  salesman  all 
the  time  that  he  would  like  to  have,  but  he  must  have 
the  good-will  of  as  many  of  them  as  possible.  In  his 
capacity  as  department  head  he  must  be  able  to  develop 
loyalty  on  the  part  of  his  assistants  and  clerks.  In  his 
dealings  with  department  heads  he  will  have  to  be  diplo- 
matic. Each  department  head  naturally  believes  that  his 
particular  requirements  and  grievances  should  have 
precedence  over  all  others,  and  the  purchasing  agent 
needs  to  have  the  friendship  of  the  various  department 
heads  just  as  much  as  that  of  the  suppliers'  salesmen. 


68  Organization  and  Management 

Requisitions  on  Purchasing  Department 

The  management  must  designate  a  list  of  department 
heads  authorized  to  make  requisitions  on  the  purchasing 
department.  Such  requisitions  should  bear  the  signature 
of  the  department  head  and  the  countersignature  of  either 
the  works  manager  or  the  office  manager,  showing  that 
he  has  approved  them.     In  the  interests  of  economy  it 


PENNSYLVANIA  STATE  COLLEGE —  REQUEST  FOR   RBQUI84TION 


o'thMarUcHT  or 

Industrial  Eng'g* 


Engineering 


aUAMTITV 


OCBCRimoN 


2000ft 


Oailfornia  White  Pine 


Pattern  Lximber 


4/4"  thick  10-  wide 


180 


00 


PWRP«3( 


Pattern  Shop 


WkNTtD  VT  WHAT   D«TC 


RCaUIRCD    BY 


2/10/15 


1/10/15 


APPROVCO 


Di^^^^t^/z^i/ii/is 


NUnetR  OF   RFaUISITION 


567 


1/12/15 


Fig.   20. — Request  for   Eequisition   Sent  the   Department  Head  by  Certain 

Designated    Members   of    Department    Authorized    to 

Make  Such  Requests 


is  customary  not  only  to  allow  the  purchasing  agent  to 
make  suggestions  to  the  works  manager  or  office  manager 
in  regard  to  requisitions,  but  also  to  encourage  him  to  do 
so.  Such  suggestions,  even  in  entirely  technical  materials 
and  apphances,  lead  to  a  mutual  understanding  which  is 
not  developed  if  the  purchasing  agent  is  compelled  to  buy 
without  questioning  exactly  what  is  specified.  However, 
there  should  never  be  any  departure  from  the  specifica- 


Buying  69 

tions  of  the  requisition  when  it  has  once  been  approved 
after  inquiry  and  suggestion  on  the  part  of  the  purchasing 
agent. 

Each  department  in  turn  should  designate  certain  men 
as  authorized  to  write  out  requests  for  requisitions.  Such 
requests  should  be  on  a  standard  form.  Figure  20  illus- 
trates such  a  form.    The  request  for  requisition  should 


The  Pennsylvania  Stale  CoDege      Vie/is. 

Wllllaasport  Hard  Wood  Lvunber  Co.,  No.     I.E. 587 

Willlamsport,   Pa. 

SBfS. — Pleese  (urnbh  the  follovrinf  (oods  to  the  Department  of     Industrial    Eng'g, 
The  Peniuyivaaia  State  College,  Slate  CoUese,  Pcnna.,  to  U  Alppeitta       Freight 
MAIL  BILLS  tnd  CORRESPONDENCE  IN  REGARD  TO  THIS  ORDER  TO  THE  PURCHASPiC  AGENT 
SEND  BILL  OF  LADING  to  the  PURCHASING  AGENT  IMMEDJATELY  UPON  SHIPMENT  <rf  OQCTM 
ADDRESS  GOODS  TO  THE  DEPARTMENT  DESIGNATED 


MAMC   or   ARTICLE 


California  White  Pine  Pattern  Lumber  4/4"  thick,  10"  wide 


^^J^^^Zc^^^ 


Rirchasiae  ligsA 


To  Purchaelng  Ag;ent.     Get  from  Wllliamsport  etock  if 
poaalble. 

Est. Value  JI8O.OO 


Fig.  21. — Purchase  Order — the  Original  Copy,  of  Which  Manifold  Copies  are 
Department  Requisitions   (See  Fig.  22) 

be  returned  by  the  department  head  to  the  person  writ- 
ing it,  with  the  requisition  number  if  it  was  written,  and 
with  reasons  for  cancelling  or  altering  the  request  if  it 
was  refused. 

In  case  the  department  head  approves  the  request  for 
requisition,  he  has  a  formal  requisition  on  the  purchasing 
agent  written  out.    In  some  lines  of  business  this  requisi- 


70  Organization  and  Management 

tion  may  be  written  out  in  manifold  copies  in  such  a  way 
that  one  copy  serves  the  purpose  of  the  purchasing  agent's 
outward  order  to  the  supplier.  Figures  21  and  22  show 
forms  of  this  character.  The  purchasing  agent  fills  in  the 
name  of  the  supplier.  He  uses  the  department's  requisi- 
tion number  as  the  purchase-order  number,  filing  his  office 
copy  of  the  requisition  by  departments  until  shipment  is 


The  Pennsylvania  State  College      1/1 1 /is. 

REQUISmON 

9Co.  I.E. 587 

7b  the  Purch^iitg  A^/tt: 
lirspectfullynKommeniilhdtt^efo/loivmjimclnbeDrti^fy-Pfperfmef'laf       Industrial    Eng'g. 


QUANTITY  NAME   OF    AKTiaE 

2000  ft.  California  White  Pine  Pattern  Lumber 


4/4"  thick,  10"  wide 


To  Purchasing  Agent.  Get  from  Wliliamaport  etocic  if 
poBsible 
Est. Value  $180.00 


Fig.   22. — JJepartmeiit  iiequisition  Written  as  a  Manifold  Copy 

Original  or  top  copy   is  sent  to  the  purcliasins  agent  and  becomes  his  outward 

order. 

made.  In  case  of  partial  shipments,  annotations  are  made 
on  the  office  copy,  which  remains  with  unfilled  outward 
orders  until  shipments  are  completed. 

Filing  Purchase-Ohdeb  Copies 

One  method  of  filing  purchase-order  copies  is,  as  sug- 
gested in  the  preceding  paragraph,  to  arrange  them  by 
the  departments  from  which  the  requisitions  emanate. 


Buying  71 

In  case  many  requisitions  come  from  a  department,  this 
may  involve  allotting  a  drawer  or  section  of  a  filing 
cabinet  to  the  requisitions  from  that  department. 

Where  the  requisition  is  of  a  different  form  from  the 
outward  purchase  order,  it  is  customary  to  file  the  requisi- 
tions according  to  the  departments  from  which  they  ema- 
nate, making  on  each  requisition  annotations  of  the  cor- 
responding purchase-order  number.  A  similar  annotation 
indicating  the  originating  requisition  is  made  on  the  filed 
copy  of  the  purchase-order  number. 

It  is  desirable  that  the  purchasing  department  have  a 
reference  index  or  finding  list  for  purchase  orders 
arranged  (1)  by  names  of  firms  to  whom  the  orders  were 
sent;  (2)  by  purchase-order  number,  so  that,  knowing  the 
name  of  a  supplier,  we  can  see  what  outstanding  orders 
he  still  has  unfilled,  and  also,  the  purchase-order  number 
being  given,  we  can  locate  the  purchase  order.  Such 
so-called  '' cross-references"  can  be  written  up  in  a  loose- 
leaf  index  or  card  index,  or  the  same  purpose  can  be 
accomplished  by  having  extra  carbon  copies  of  the  pur- 
chase order  written,  one  set  being  arranged  alphabeti- 
cally by  name  of  supplier  and  the  other  beiug  arranged 
in  numerical  order. 

Following  Up  Puechase  Oedees 

An  important  feature  of  the  purchasing  department  is 
the  so-called  ''tickler  file."  A  file  of  this  sort  has  a  com- 
partment for  each  day.  The  clerk  in  charge  of  the  file 
brings  the  papers  in  question  to  the  attention  of  the 
party  whose  name  is  indicated  on  a  memorandum  at- 
tached to  the  papers  in  the  tickler  file.  After  the  papers 
have  been  selected  which  relate  to  doliverics  due  and  not 
yet  made,  a  follow-up  letter  is  written  and  the  papers 
filed  under  a  new  date  in  the  tickler  file,  so  as  to  come  to 


72 


Organization  and  Management 


the  attention  of  the  proper  person  in  the  purchasing  de- 
partment at  the  new  date.  A  follow-up  postal  card  may 
be  used  for  inquiring  about  a  delayed  shipment.  In  case 
the  formal  follow-up  card  does  not  bring  results,  there 
should  be  a  series  of  carefully  worded  form  letters  and 
telegrams  together  with  a  plan  for  cancellation  of  or- 
ders, provided  goods  can  be  obtained  elsewhere,  as  a 
penalty  for  the  supplier's  failure  to  live  up  to  agree- 
ments as  to  delivery. 

Financial  Problems  in  Buying 

The  most  apparent  financial  problem  in  buying  is  how 
to  secure  goods  at  the  lowest  price.    This,  however,  is  by 


PURCHASING  AGENTS  REPORT  OF  MONEYS  FALLING  DUB 
BY  REASON  OF  PURCHASE  ORDERS  ISSUED 


n.t-       .Trw.    -IK,    101B 


Req.  Na 


OiJered  Fr< 


Descnptive 


Amount 


Dale  Due 


i.E.se? 


WmBpt.H.W.L.OO. 


Pattern  Pine 


180.00 


Mar.  l/lS 


Fnj.  23. — Bejport  of  Accounts  Payable  Likely  to  be  Incurred  by  Eeason  of 
Outstanding  Purchase  Orders 

no  means  the  only  financial  problem  involved.  It  is 
exceedingly  important  for  the  management  to  know  the 
financial  liability  involved  by  reason  of  outstanding  pur- 
chase orders,  as  well  as  at  what  times  the  amounts  in 
question  will  fall  due.  In  other  words,  the  management 
should  receive  a  statement  from  the  purchasing  depart- 
ment showing,  preferably  by  weeks,  the  amount  of  money 


Buying 


73 


which  will  have  to  be  paid  out  for  incoming  materials 
during  those  weeks.  Such  a  statement  enables  the  man- 
agement to  negotiate  loans  when  necessary  and  to  make 
arrangements  to  profit  by  cash  discounts  on  large  bills 
where  these  are  from  firms  granting  such  discounts. 

Figure  23  shows  the  form  in  which  is  made  up  such  a 
statement  of  moneys  falling  due  by  reason  of  purchase 
orders  issued. 

Another    statement    which    summarizes    the    invoices 


Purchasing  Agent's  Report  of  Invoices  Approved 

Date      J^»  15.  1918. 


Req. 

No. 


Bought  From 


Descriptive 


Accts. 

Payable 

Cr. 


MaJerial 
Dr. 


Fin'd 
Stock 
Dr. 


Mfg. 
Expense 


Office 

Elxpense 

Dr. 


-g_         Jonea  Printing  stationery 
Co 


TOTALS 


16.  S5 


16,25 


Fig.    24. — Purchasing    Agent's    Report    of    Invoices    Approved,    Showing 

Accounts  to  Which  Materials  and  Supplies  are  IXstributed 

Addltfonal  columns  may  be  provided  for  equipment,  tools,  and  sub-classlflcations 
of  material  and  expense. 

approved  is  illustrated  in  Figure  24.  Snoh  a  one  may 
contain  more  columns  than  are  shown  in  the  example. 
For  instance,  there  may  be  additional  columns  for  sub- 
divisions of  the  raw-materials  account,  tools,  equipment, 
and  further  subdivisions  of  the  expense  accounts. 

Relation  of  Receiving  and  Stores  Depaktments  to 
Purchasing  Department 

Inasmuch  as  the  receiving  and  stores  departments  are 
engaged   in  the  handling  of  materials,  many  lines  of 


74  Organization  and  Management 

business  make  these  departments  subsidiary  to  the  pur- 
chasing department.  The  cost  of  conducting  purchasing, 
receiving,  and  stores  departments  is  in  many  enterprises 
considered  an  expense  factor,  designated  as  material 
burden,  which  is  calculated  as  a  percentage  to  be  added 
to  the  invoice  costs  of  material  in  order  to  determine  the 
unit  price  at  which  work-in-process  account  is  to  be 
charged  for  all  materials  used  in  work  in  process.  Such 
material  burden  would  also  include  freight,  express,  and 
drayage  on  incoming  materials  in  case  these  items  are 
not  added  separately  to  determine  the  unit  prices  of  raw 
materials.  The  organization,  equipment,  and  systems 
used  in  the  stores  and  receiving  departments  are  de- 
scribed in  the  following  chapter. 


TEST  QUESTIONS 

1.  What  are  some  of  the  important  questions,  outside  of  buy- 
ing, with  which  the  purchasing  agent  has  to  deal? 

2.  What  kind  of  knowledge  must  the  purchasing  agent  pos- 
sess in  regard  to  the  materials  of  the  business  in  which  he  is 
engaged  ? 

3.  Describe  a  bureau  of  information  such  as  should  be  main- 
tained in  a  well-conducted  purchasing  department. 

4.  What  sort  of  knowledge  as  to  market  conditions  must  the 
purchasing  agent  obtain,  and  what  use  should  he  make  of  such 
knowledge  ? 

5.  What  sort  of  records  should  be  kept  relative  to  current 
and  past  purchases? 

6.  How  should  quotations  be  recorded? 

7.  How  does  the  human  element  enter  into  buying? 

8.  What  persons  should  be  authorized  to  make  requisitions 
on  the  purchasing  agent  for  materials  and  supplies? 


Buying  75 

9.  Describe  the  procedure  and  printed  form  in  connection 
with  requests  for  requisitions  made  by  persons  not  authorized  to 
make  requisitions  themselves. 

10.  To  what  extent  should  the  purchasing  agent  take  part  in 
the  preparation  of  specifications  for  materials  and  supplies? 

11.  How  are  persons  making  requisitions  or  requests  for 
requisitions,  informed  what  disposition  has  been  made  of  their 
requests  or  requisitions? 

12.  How  are  purchasing-oflfice  copies  of  purchasing  requisi- 
tions filed? 

13.  How  are  requisitions  on  the  purchasing  agent  followed  up  ? 

14.  What  is  a  tickler  file,  and  how  is  it  used  in  a  purchasing 
department  ? 

15.  What  financial  problems  are  involved  in  buying? 

16.  What  sort  of  statement  should  be  made  relative  to  invoices 
approved  during  each  fiscal  period? 

17.  What  are  the  arguments  for  and  against  making  the  re- 
ceiving and  stores  departments  subordinate  to  the  purchasing 
department  ? 

18.  What  is  material  burden  ? 

19.  Should  materials  be  appraised  at  their  invoice  cost,  or 
should  material  burden  and  inward  freight  and  hauling  be 
added  in  valuing  materials  and  supplies  for  inventory  purposes  ? 


CHAPTER  VI 
beceiving,  storing,  and  recording  materials 

Determination  of  Material  Requirements 

In  a  continuous-process  industry  of  the  analytic  type, 
when  the  capacity  and  output  of  the  plant  have  been 
determined  on,  it  is  a  comparatively  simple  matter  to 
provide  storage  capacity  for  the  raw  materials  and  sup- 
plies, and  to  arrange  by  contract  for  a  steady  flow  of 
these  materials  and  supplies  to  correspond  to  the  pre- 
determined output. 

In  a  synthetic  industry  of  an  assembling  nature  the 
problem  of  providing  the  materials  in  proper  quantity 
and  at  the  most  advantageous  times  becomes  more 
complex.  Where  the  finished  product  is  composed  of  a 
limited  range  of  styles  or  sizes  of  a  standard  product, 
such  as  typewriters  or  sewing-machines,  the  requirements 
can  be  fairly  well  anticipated  for  a  considerable  future 
period. 

Where  only  a  portion  of  the  component  parts  are  made 
up  in  quantity  on  stock  orders  and  the  larger  and  more 
expensive  parts  are  not  put  into  work  until  definite 
sales  are  made,  the  problem  becomes  further  involved. 
It  is  quite  apparent  that  the  only  reliable  basis  for  sys- 
tems of  receiving,  storing,  replenishing,  and  recording 
materials  is  a  collection  of  material  specifications  or 
material  lists  covering  everything  in  the  way  of  raw 

76 


Receiving  and  Storing  77 

materials,  supplies,  finished  parts  built  in  the  establish- 
ment's own  shop,  and  finished  parts  bought  outside,  that 
go  into  the  article  to  be  sold. 

Financial,  Importance  of  Materials 

It  has  often  been  remarked  that  high-grade  help  is 
employed  to  take  scrupulous  care  and  keep  perfect 
records  of  a  company's  cash,  and  that  the  same  company's 
materials,  supplies,  finished  parts,  and  finished  product, 
though  representing  from  fifty  to  one  hundred  times  as 
much  money  as  the  company's  cash  on  hand  and  in  bank, 
are  left  to  the  care  of  low-grade  and  inadequate  help.  It 
would  be  well  to  compare  the  cost  per  dollar  of  cash 
handled  by  cashiers  and  clerks  keeping  cash  book,  petty- 
cash  records,  etc.,  with  the  cost  per  dollar's  worth  of 
materials  and  supplies  handled  by  receiving  and  stores 
clerks  and  helpers. 

Stores  represent  money.  A  cashier's  ofiice  manned 
l)y  help  who  could  not  discriminate  between  foreign  and 
American  coin,  who  kept  cents  in  excess  and  dimes  in 
insufficiency  in  petty  cash,  and  who  could  not  account 
for  receipts  and  disbursements,  is  inconceivable;  yet 
many  large  industrial  establishments  tolerate,  in  charge 
of  their  materials,  help  who  handle  the  stocks  in  just  the 
inefficient  manner  indicated.  Money  invested  in  need- 
lessly large  stocks  or  in  incorrect  stocks  is  inactive,  and 
in  most  instances  represents  anything  but  "quick"  or 
convertible  assets. 

Stores  Accounting 

A  good  system  of  stores  accounting  must  provide  a 
means  of  knowing: 

1.  What  materials  have  been  bought. 

2.  On  whose  authority  they  were  bought 


78  Organization  and  Management 

3.  What  outstanding  orders  for  material  have  be^i 

issued. 

4.  What  materials  have  been  disbursed. 

5.  What  materials  are  required  for  present  and  future 

production  orders. 

6.  To  what  person,  order,  or  account  all  materials  dis- 

bursed have  been  charged. 

7.  What  balance  of  each  kind  of  material  is  actually  on 

hand. 

8.  What  the  balance  or  shortage  is  with  regard  to 

each  item,  deducting  reserve  for  orders  on  hand. 

Moreover,  there  must  be  a  unit  price  for  every  item 
and  a  money  value  easily  determinable  for  every  classi- 
fication indicated  above. 

The  value  of  correct  methods  in  keeping  account  of 
materials  is  so  great  that,  in  many  cases  where  proper 
methods  have  been  provided  after  a  realization  of  the 
losses  that  were  occurring  from  lack  of  information  in 
this  important  field,  concerns  on  the  verge  of  insolvency 
have  been  put  on  a  sound  financial  basis. 

Material  Specifications 

All  production  orders,  no  matter  what  the  class  of 
business  is,  should  first  pass  to  a  person  or  department 
whose  duty  it  is  to  prepare  complete  specifications  cover- 
ing all  materials  required  for  the  execution  of  these 
orders.  It  has  been  a  matter  of  common  experience  that, 
when  the  bill  of  material  is  first  introduced,  no  matter 
how  expert  or  experienced  the  person  may  be  who  has 
prepared  it,  he  will  find,  if  he  follows  the  actual  produc- 
tion through  the  establishment  by  personal  visits,  that 
he  has  omitted  numerous  items  of  materials  and 
supplies. 


Receiving  and  Storing 


79 


Figure  25  shows  a  form  of  material  list  as  used  in  a 
concern  building  machinery  and  keeping  accurate  account 
of  materials.  A  statement  is  first  made  of  the  particular 
type  of  product  for  which  this  list  is  made.  A  number 
is  assigned  to  the  material  specification,  so  that,  if  it 
becomes  standardized,  it  can  be  used  again  or  so  that 
it  may  serve  for  reference  in  ordering  repair  parts.  The 
number  of  the  order  for  which  this  specification  is  used 


MATERIAL  REQUIRED  FOR 


i  Pr«B»  0  A  4 


FOR 


tie  loatt  «fg.  09. 


WRITTEN  BY 

B.   L.   altb 


MATERIAL  LIST  No   .  •«. 


SHEET  ISSUED 


MONTH 

Jan. 


DAY 


YEAR 


TO  BE  SHIPPED 


MONTH 

rob. 


DAY 


YEAR 

1915 


ORDER  No. 


SHEET  No  No.  SHEETS 


Quantity 


Article 


Material 


Piece  Symbol 


Pattero 


Drawing 


P871 


Ehsft  dollar 


CHECKED  BY 


APPROVED 


Fig.  25. — Material  List  Used  in  Assembling  Type  of  Manufacturing  Industry 

is  given,  and  likewise  the  date  on  which  the  sheets  are 
issued,  the  number  of  sheets,  and  the  date  of  shipment. 
Then  follows  a  list  of  separate  material  items,  giving 
the  quantity  of  each,  the  name  of  the  individual  article, 
material  of  which  it  is  made,  the  symbol,  pattern  number, 
and  dra^ving  number  covering  the  individual  piece, 
together  with  countersignatures  of  such  officials  or 
department  heads  as  should  check  over  the  material 
specification. 


60  Organization  and  Management 

This  checking  is  important  in  many  enterprises  where 
minor  changes  in  design  may  be  found  desirable.  For 
instance,  a  brass  piece  may  be  replaced  by  a  malleable- 
iron  one,  a  wrought-iron  piece  by  a  steel  piece,  etc.,  and 
the  change  may  not  occur  to  anybody  until  the  specifica- 
tion for  a  new  order  is  being  prepared.  Checking  at 
this  point  will  frequently  prevent  changes  while  the  work 
is  in  process,  the  latter  procedure  entailing  wastes  of 
material,  labor,  and  clerks'  time.  Moreover,  the  dis- 
ciplinary effect  of  knowing  that  a  bill  of  material  is  cor- 
rect and  checked  to  the  very  letter  is  important.  It 
shows  that  the  management  knows  what  it  wants  and 
expects  to  get  exactly  what  is  specified  and  nothing 
else. 

Relation  of  Matekial,  Records  to  Vaeious  Departments 

Figure  26  illustrates  the  connection  between  material 
records  and  various  departments. 

Path  1  shows  how  the  sales  department  turns  over  its 
contracts  to  the  order  department. 

Path  2  shows  how  the  manufacturing  committee,  after 
deciding  on  a  general  manufacturing  program,  or  the 
making  of  product  or  parts  for  stock,  advises  the  order 
department  of  its  decisions. 

Path  3  shows  how  the  orders  are  turned  over  to  the 
technical  department,  which  in  a  machine-building  com- 
pany would  be  the  designing  department,  having  a  man 
or  men  assigned  to  the  task  of  preparing  bills  of  ma- 
terial. 

Path  4  shows  how  the  bill  of  material  is  turned  over  to 
the  other  stores  clerks  after  it  has  been  written.  These 
clerks  determine  from  their  perpetual  inventory  sheets 
of  stores  what  materials  must  be  bought,  what  materials 


Receiving  and  Storing 


81 


SALES 
DEPARTMENT 

MANUFACTURING 
COMMIITLE 

^ 

^ 

0 

ORDER 
DEPARTMENT 

9 

TECHNICAL 
DEPARTMENT 

BILL  OF  MATERIAL 
DIVISION 

9 

STORES  RECORD 
DEPARTMENT 

r--^^^ 

( 

) 

^-<iX.^ 

PURCHASING 
DEPARTMENT 

PRODUCTION 
DEPARTMENT 

<P 

9 

RECEIVING 
DEPARTMENT 

STORE 
ROOM 

SHOPS 

t 

SHOPS 

9 

FINISHED 
STOCK  ROOM 

9 

STORES  RECORD 
DEPARTMENT 

SHIPPING 
DEPARTMENT 

BILLING  OR  ACCOUNT- 
ING DEPARTMENT 

9 

CONSIGNEE 

Fig.  26. — Chart  Illustrating  Eolation  of  Material  Records  to  the  Various 
Departments  of   an   Industry 


82  Organiaatian  and  Management 

are  in  stock,  and  what  items  must  be  made  up  in  the 
shop. 

Path  5  shows  how  the  stores-record  department  makes 
requisitions  on  the  purchasing  agent  for  materials 
needed. 

Path  6  shows  how  the  stores-record  department  re- 
quests the  issuance  of  production  orders  for  the  making 
up  of  detail  parts  on  stock  orders  to  replenish  store-room 
stock  of  parts,  or  to  make  special  parts  for  orders. 

Path  7  shows  the  issuance  of  instructions  to  the  store 
room  to  reserve  certain  parts  for  orders. 

Path  8  shows  how  the  purchasing  department  notifies 
the  receiving  department  of  outstanding  purchase  orders. 

Path  9  shows  how  the  production  orders  for  component 
parts  are  sent  to  the  shops. 

Path  10  shows  how  the  receiving  department,  after 
checking  and  reporting  incoming  goods,  sends  them  to 
the  store  room. 

Path  11  shows  how  component  parts,  after  having  been 
made  in  the  shop  and  inspected,  are  turned  into  the 
store  room. 

Path  12  shows  the  reissue  to  the  shops  of  parts  and 
groups  for  assembly  and  erection. 

Path  13  shows  the  transfer  of  completed  product  to 
finished  stock  room. 

Path  14  shows  the  issue  of  finished  product  from  the 
stock  room  to  the  shipping  department. 

Path  15  shows  the  notification  by  the  shipping  depart- 
ment to  the  stores-record  department  of  shipment. 

Path  16  shows  notification  of  shipment  sent  to  billing 
or  accounting  department. 

Path  17  shows  the  shipment  of  goods  to  consignee  and 
the  shipping  notice  sent  him. 


Receiving  and  Storing  S3 

At  various  stations  there  will  be  manifold  copies  of 
certain  notifications  going  to  the  cost  and  planning  or 
tracing  departments.  With  these  we  shall  not  concern 
ourselves  now,  as  we  are  primarily  interested  in  the 
course-of-material  and  the  record-of-material  balances 
with  their  conversion  into  money  values  at  such  places 
and  such  times  as  may  be  essential  to  the  realization  of 
our  principal  aim,  which  we  must  always  bear  in  mind. 
This  aim  is  the  following : 

1.  To  know  regularly  once  a  month  the  money  value 
of  all  materials  received. 

2.  To  know  monthly  the  value  of  materials  to  be  cred- 
ited to  stores  and  charged  to  work  in  process. 

3.  To  know  monthly  the  money  value  of  work  in  process 
which  has  been  converted  into  finished  stock. 

Knowing  the  foregoing  items,  we  shall  be  in  a  position 
to  determine  the  money  value  of  our  raw-materials  or 
stores  assets,  the  money  value  of  our  work-in-process 
assets,  and  the  money  value  of  our  finished-products  or 
finished-stock  assets.  Having  these  data  in  terms  of 
dollars  and  cents,  we  can  prepare  a  monthly  balance 
sheet  of  the  entire  business  instead  of  waiting  for  an 
annual  physical  inventory.  We  have  already  illustrated 
the  bill  of  material,  which  is  the  natural  starting-point  of 
the  required  records.  The  stores-department  records  are 
the  next  set  which  we  shall  have  to  detail. 

Perpetual  Inventories  of  Stores 

The  operation  of  a  perpetual  inventory  of  stores  is  best 
explained  by  inspecting  a  typical  balance-of-stores  ledger 
sheet.  This  is  illustrated  in  Figure  27.  At  the  top  of 
this  sheet  there  is  a  space  for  a  description  of  the  article. 
At  the  upper  right-hand  corner  there  is  a  space  for  the 


84 


Organization  and  Management 


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Receiving  and  Storing  85 

** Account  No."  This  is  used  if  stores  are  classified  as 
to  their  serving  certain  departments.  For  instance, 
foundry  materials  and  supplies  might  constitute  a  cer- 
tain account  number,  while  forge-shop  materials  and 
supplies  constitute  another  account  number.  The  space 
for  "Reference  No."  is  filled  in  either  with  the  number 
or  mnemonic  identification  mark  of  the  piece,  this  symbol 
being  the  abbreviation  or  shop  term  used  on  withdrawal 
orders,  time  tickets,  and  elsewhere,  to  economize  time 
and  space.  For  instance,  in  designing  a  mnemonic-sym- 
bol system  we  might  first  use  a  letter  to  indicate  a  certain 
group,  as  for  example  H  for  hardware  group ;  then  would 
come  a  subdivision  of  the  group,  as  for  example  Ca  for 
catches,  and  a  further  symbol  to  indicate  the  size,  number, 
or  other  description  of  the  material.  For  instance, 
bronze  cupboard  catches  would  be  indicated  as  HCaCBr, 
and  this  symbol  would  be  followed  by  a  number,  if  there 
were  a  specific  number  or  size  designated. 

A  further  annotation  in  the  upper  right-hand  corner  of 
the  sheet  refers  to  minimum  stock  to  be  carried.  This 
is  filled  in  with  a  number  only  when  the  use  of  the  article 
is  thoroughly  standardized.  In  all  other  instances  a 
rubber-stamp  entry,  "Report  to  Production  Depart- 
ment," is  inserted.  It  is  not  wise  to  leave  to  the  discre- 
tion of  a  stores-record  clerk  the  replenishment  of 
stocks  of  materials  which  in  many  cases  may  be  in  a 
transitional  or  obsolescent  stage. 

Next  on  the  sheet  follows  the  location  of  the  article 
as  to  the  section  of  the  store  room  and  the  bin  in  which 
it  is  located.  Then  comes  the  unit,  whether  pounds,  feet, 
dozen,  one,  etc.,  and  the  money  value  of  one  unit,  space 
being  allowed  for  changes  in  the  money  value  per  unit. 

Where  a  perpetual  inventory  is  kept  and  monthly 
balances  of  the  money  value  of  stores  on  hand,  received, 


86  Organization  and  Management 

and  issued  are  reported,  it  is  customary  to  include  inward 
freight  and  hauling  (and  sometimes  also  a  percentage 
to  cover  cost  of  buying,  receiving,  and  storing)  in  the  unit 
prices  at  which  materials  are  charged  to  work  in  process 
or  manufacturing  expense,  but  the  amounts  thus  charged 
to  stores  do  not  appear  in  the  expense  account.  This 
procedure  is  coming  to  be  recognized  among  accountants 
and  appraisers  as  not  only  legitimate  but  correct,  inas- 
much as  inward  freight  and  the  cost  of  buying,  receiving, 
and  storing  material  increase  the  replacement  value  of 
material  and  constitute  in  a  going  concern  an  asset  and 
not  a  loss.  By  charging  inward  freight  and  drayage  and 
cost  of  buying,  receiving,  and  storing  to  a  general  ex- 
pense or  other  revenue  account,  we  are  undervaluing  our 
stores. 

Making  Entries  in  the  Stores  Ledger 

The  stores  ledger  has  usually  five  groups  of  columns 
relating  to  the  following  transactions :  (1)  goods  ordered ; 
(2)  goods  received;  (3)  goods  reserved  for  orders;  (4) 
goods  issued;  (5)  goods  available. 

The  entries  in  the  columns  referring  to  goods  ordered 
are  made  from  copies  of  purchase  requisitions.  The 
entries  relating  to  goods  received  are  made  from  copies 
of  receiving-clerks'  reports.  The  entries  relating  to 
goods  resen'ed  for  orders  are  made  from  the  bill  of 
material.  The  entries  relating  to  goods  issued  are  made 
from  copies  of  withdrawal  slips  or  orders  on  store  room 
and  from  shipping  reports.  The  balances  relating  to 
goods  available  are  easily  struck  when  the  preceding 
sets  of  columns  are  properly  filled.  The  forms  for  bills 
of  material  and  purchase  requisitions  have  already  been 
considered.  We  have  still  to  consider  the  reports  from 
the  receiving  department,  the  withdrawal  slips  covering 


Receiving  and  Storing 


87 


goods  issued,  and  shipping  memoranda  relating  to  goods 
shipped. 

ENTRIES  RELATING  TO  GOODS  RECEIVED 

The  receiving  department  should  render  reports  cover- 
ing all  materials  received  from  outside.  Such  reports 
are  sometimes  made  in  the  form  of  a  single  one  referring 


MATERIALS  RECEIVED 


Date 


From 
Via 


Check 
Which 


Bale 


Crate 


Package 


Bbl. 


Reel 


Loose 


Purchase 
Order  No. 


Article 


Quantity  or 
Weight 


Received  by 
Delivered  to 


Fig.    28. — ^Materials-Eeceived    Eeport    used    by    Eeceiving    Department    for 
Separate   Eeport   on   each   Inward   Consignment 


to  receipts  from  various  sources  or  in  the  form  of  a 
separate  sheet  for  each  distinct  incoming  consignment. 
The  latter  form  is  more  flexible,  as  a  iiile,  although 
it  occupies  more  paper. 

Figure  28  illustrates  a  form  for  reporting  receipts  of 
material  in  which  a  separate  report  is  used  for  each 
inward  consignment.  This  report  is  usually  written  in 
manifold,   an   autographic-register  machine   being   fre- 


88  Organization  and  Management 

quently  found  advantageous  for  this  purpose.  One  copy 
is  kept  on  file  in  the  receiving  department,  another  sent 
to  the  purchasing  department,  another  to  the  stores- 
record  department,  and  sometimes  another  to  the  pro- 
duction department. 

Another  source  of  receipts  by  the  store  room  would  be 
material  returned  by  the  shop.    For  material  returned  in 


STORES    CREDIT 

Received  frort< 

Req.  No. 

Order  No 

Qoapttty 

Materia/  Received 

eo3t  Unit 

Amount 

(UmIo.  ort»  rt«»n  only) 

Remark! 

°***                                      "     ■  -                                                                                        sw-  Km...                         1 

Fig.    29. — Credit   Memorandum  Covering   Items   Eeturned   to   Store   Room 

this  manner  a  stores-credit  memorandum  is  used,  illus- 
trated in  Figure  29. 

ENTRIES  RELATING  TO  GOODS  ISSUED 

Two  types  of  reports  relating  to  goods  disbursed  have 
been  mentioned:  (1)  those  relating  to  raw  materials  or 
finished  parts  issued  to  the  shop  and  (2)  finished  stock 
shippod  outward  by  the  shipping  department. 

Figure  30  illustrates  a  form  for  withdrawal  order  for 
material.     In  a  well-organized   shop  these  withdrawal 


Receiving  and  Storing 


89 


orders  for  material  are  prepared  at  the  same  time  with 
the  material  list,  being  written  out  in  advance  and  stored 
in  a  pocket  in  a  large  fibre-board  portfolio  designed  to 
hold  all  the  various  papers,  drawings,  lists,  etc.,  relating 
to  a  given  order. 

Reports  from  the  shipping  department  are  made  in  the 
form  of  a  shipping  memorandum  or  packing  list.  This 
is  also  written  in  manifold,  one  copy  going  to  the  order 
department,  one  to  the  billing  clerk,  one  to  the  stores 


WITHDRAWAL  ORDER  FOR  MATERIAL 

TO  BE  USEO  FOR  ONE  ITEM  ONLY 

Charge  toOrdsr  No. 

Acet  No. 

Rel.  No. 

Quantity 

OaaoripUon  of  ItMii  Wanted 

Cost /Unit 

Amount 

r-\ 

Ressrved 
vsw  Itrri 


I  authoriz*  tha  withdrawal  of  thia  matsrial 


Fig.  30. — Withdrawal  Order  for  Materials  Issued  from  the  Store  Eoom 


record,  one  to  the  consignee,  and  one  remaining  on  file  in 
the  shipping  department.  Figure  31  illustrates  such  a 
memorandum. 

Physical  Features  of  Store  Rooms 

The  stores  of  an  industry,  although  the  records  and 
perpetual  inventory  may  all  be  kept  in  one  place,  may 
have  to  be  distributed  in  rooms  or  buildings  most  con- 
venient to  the  efficient  handling  of  materials,  each  separate 
store  room  being  provided  with  the  necessary  clerical  and 
laboring  help,  all  being  under  the  supervision  of  the  gen- 


90 


Organization  and  Management 


eral  head  of  stores  department.  For  example,  castings 
may  have  to  be  located  near  the  first  machining  processes ; 
bar  stock  for  the  forge-shop  may  have  to  be  located  near 
the  forge-shop;  finished  machined  parts  may  be  midway 
between  the  machine  tools  and  the  assembling  and  erecting 
department,  and  finished  product  may  have  to  be  adjacent 
to  the  shipping  department. 


SHIPPING  MEMORANDUM 

Date 

Nn 

From   . 

Order  No. 

Car  No. 

Via 

No. 

Pkg. 

Contents 

Weight 

Pack< 

'd  by- 

"" 

Fig.  31. — Memorandum  of  Materials  Shipped 


Careful  attention  must  be  given  to  the  location  of  store 
rooms  and  stores  buildings  as  essential  features  in  an 
industrial  plant.  The  store  rooms  and  buildings  must  be 
designed  so  as  to  prevent  overcrowding.  There  must 
be  room  for  the  passage  of  trucks,  good  natural  and  arti- 
ficial light,  room  for  expansion,  and  often  bins  and  racks 
must  be  designed  for  special  purposes.  A  pneumatic-tube 
service  system  between  all  the  departments  handling 
material  records  is  frequently  desirable,  since  it  permits 


Receiving  and  Storing  91 

of  more  continuous  and  up-to-the-minute  accounting  than 
a  factory  mail-delivery  system.  Dumb-waiters  to  various 
floors  and  cable-driven  baskets  for  light  goods  are  also 
frequently  installed.  A  standard  form  for  sections  and 
bin  units  has  already  been  suggested. 

It  is  quite  apparent  that  the  handling  of  materials  of  all 
sorts  affords  opportunity  for  the  best  managing  ability 
and  is  a  most  fruitful  field  for  developing  economies  and 
increased  efiQciency  of  production. 


TEST  QUESTIONS 

1.  How  may  we  determine  in  advance  the  approximate  an- 
nual material  requirements  of  an  industry? 

2.  What  is  the  argument  in  favor  of  high-grade  help  in  the 
stores  department? 

3.  "What  information  should  be  disclosed  by  a  complete  sys- 
tem of  records  of  stores  receipts  and  disbursements  ? 

4.  What  is  a  material  list  or  bill  of  material?  What  use  is 
made  of  it  in  comiection  with  stores  records? 

5.  Indicate  by  a  chart  the  relation  of  material  records  to  the 
sales  department,  the  order  department,  the  desiring  depart- 
ment, the  stores  department,  the  purchasing  department,  the 
receiving  department,  the  production  department,  and  shop. 

6.  What  monthly  financial  summaries  should  be  recorded  and 
reported  by  the  stores  department? 

7.  Make  a  sketch  of  a  balance-of -stores  sheet  as  used  in  a  per- 
petual stores-inventory  system. 

8.  From  what  source  is  mformatiou  received  relative  to  goods 
ordered  ? 

9.  From  what  source  and  in  what  manner  is  information  re- 
ceived relative  to  goods  received? 

10.  From  whom  and  how  is  information  received  relative  to 
goods  reserved  for  orders? 


92  Organization  and  Management 

11.  From  what  source  and  in  what  manner  is  information 
received  relative  to  goods  issued? 

12.  Where  is  a  good  location  for  storing  the  following: 
(a)  iron  castings;  (b)  bar  stock  for  forge-shop;  (c)  finished 
machined  parts;  (d)  complete  finished  and  assembled  product? 

13.  Discuss  the  desirability  and  practicability  of  (a)  pneu- 
matic-tube service  system;  (b)  dumb-waiter  stores  delivery  sys- 
tem; (c)  cable-driven  stores  service  basket  system. 

14.  Under  what  conditions  is  it  preferable  to  have  a  number 
of  distinct  store  rooms  rather  than  one  large  central  store  room  ? 

15.  Why  is  the  perpetual  stores  inventory  preferably  kept 
near  the  cost  and  production  records  rather  than  in  the  store 
room? 

16.  Why  will  bin-ticket  records  not  answer  the  same  purpose 
as  perpetual  inventory  sheets  kept  adjacent  to  the  stores  and 
production  records? 

17.  Why  should  stores-record  clerks  not  be  permitted  to  issue 
replenishment  orders  without  approval  by  higher  authority? 

18.  Would  you  recommend  verifying  the  paper  perpetual 
stores  inventory  by  some  system  of  physical  stock-taking  ?  If  so, 
what  system  would  you  recommend? 

19.  If  a  man  is  a  laborer  or  window  clerk  in  a  store  room, 
how  can  he  train  himself  for  promotion  to  a  more  responsible 
position  ? 

20.  What  provision  should  be  made  for  recording  materials 
returned  to  the  store  room? 


CHAPTER  Vn 
planning 

Planning  of  Industrial  Activities  in  Advance 

This  has  come  to  be  recognized  as  an  important  and 
necessary  feature  of  management.  The  general  manager 
must  forecast  future  trade,  labor,  and  market  conditions 
from  his  knowledge  and  study  of  the  statistics  of  the 
industry  in  question.  He  must  shape  the  future  policies 
of  the  business  so  as  to  make  them  coincide  with  the 
wishes  of  the  directors.  He  must  devise  improved  meth- 
ods of  management,  assisted  in  this  by  his  principal 
subordinates. 

The  planning  of  all  of  the  industrial  activities  is  a 
much  more  comprehensive  problem  than  looking  ahead 
in  the  shop  alone.  The  same  principles  underlie  this 
larger  problem  as  form  the  basis  of  shop-planning.  Shop- 
planning  methods  were  introduced  because  it  became 
evident  to  the  progressive  manager  that  mechanics  look- 
ing for  blue-prints,  tools,  fixtures,  materials,  and  supplies, 
and  waiting  to  be  told  which  job  to  do  next  were  losing 
valuable  time.  Very  often  the  next  job  assigned  by  the 
foreman  was  selected  on  the  basis  of  expediency,  being 
the  job  most  easily  found  or  most  readily  disposed  of, 
instead  of  being  the  most  important  job  to  be  done  next. 

93 


94  Organiaat'ion  and  Management 

Comprehensive  planning  involves: 

1.  Finances. 

2.  Sales. 

3.  Production. 

4.  Labor. 

5.  Plant. 

Figure  32  is  a  chart  illustrating  comprehensive  plan- 
ning along  the  lines  indicated. 

Planning  as  to  Finances 

The  treasurer  or  comptroller  will  consult  with  the 
sales,  order,  and  accounting  departments  as  to  what 
money  is  coming  in  and  when  it  is  coming  in.  He  vdW. 
consult  with  the  purchasing  department,  pay-roll  depart- 
ment, and  accounting  department  in  order  to  get  informa- 
tion as  to  what  money  is  going  out  and  when  it  will  have 
to  be  paid.  Using  both  of  the  above  classes  of  information 
as  a  basis,  he  will  have  to  determine  what  money,  if  any, 
is  to  be  borrowed,  what  securities  can  be  offered  for 
loans,  also  whether  it  would  be  advisable  to  present  to 
the  board  of  directors  any  proposals  as  to  sales  of 
unissued  capital  stock,  increasing  the  capital  stock,  or 
issuing  bonds. 

Planning  as  to  Sales 

The  sales  manager  will  have  to  determine  first  of  all 
what  to  sell.  If  the  output  of  the  industry  is  at  all  varied, 
the  sales  manager  will  have  to  plan  on  what  classes  of 
finished  product  to  lay  greatest  stress.  The  selection  as 
to  what  to  sell  will  be  based  on  (1)  consideration  of  what 
is  the  most  profitable  product;  (2)  what  is  in  greatest 
and  most  steady  demand.    He  will  have  to  plan  next  how 


Planning 


95 


PLANNING  INDUSTRIAL  ACTIVITIES 


I.  As  to  finances 
Treasurer  or     S 

GjmptroUer  | 

II.  As  to  sales 
Sales  Mana- 
ger 


What  money  is  coming  in  and  when 

What  money  is  going  out  and  when 

What  money  must  be  borrowed  or  raised  and  how 

What  to  sell  ^ 


How  much  to  sell 
How  to  sell  it 


What  work  is  to  be 

done  < 

Production  Manager 


What  materials  are 

required 
Stores  Manager       ^ 


Secures  data  from:  ^ 
Sales  department 
Designing  depart- 
ment 
Manufacturmg 

committee 
Order  department 
Stores  department 
/■Secures-data  from: 
Bill  of  material 
department 


As  to  definite  and  probable 
future  work 


As  to  materials  needed 

As  to  what  is  on  hand  and 
what  has  to  be  bought  or 
made 


Purchasing  depart-j    ^s  to  outward  orders 
ment  J 


III.  As  to  pro-  /where  work  is  to  be 
duction       /       done  , 

Works  Managed  Roy  te  Manager 


/-Secures  data  from: 
Production  depart 


Routing  depart- 
ment 


1  As 


to  what  is  to  be  made 
As  to  where  to  do  the  work 


How  work  is  to  be 

done 
Ti  me  Study  and 

Instruction 

Manager 


Secures  data  from : 

Time  study  depart-"!   As  to  detailed  methods  and 
ment  J       *"»« 


How  long  work  will 
take  and  when  it 
shall  be  done        ^ 

Order  of  Work 
Manager 

L 

r 


Inspection  depart- 
V.      ment 
'Secures  data  from 

Sales  and  order  de-    . 
partments 


art-  "\ 


As  to  accuracy 


Cost  department 

Order  of  work  depart- 
ment 


As  to  when  work  is  wanted 


>  As  to  how  long  work  usually 
takes 

As  to  work  ahead  at  each 
machine,  bench,  or  other 
production  center 


IV.  As  to  em- 
ployment 

Employment     / 

Manager  or 

Superintendent 


What  kind  of  men  and  how  many  to  employ 

What  kind  of  men  and  how  many  to  drop 

Whom  to  promote 

What  welfare,  social  safety,  and  educational  activities  to  conduct 


V. 


Fro.  32. — CTiart  rUustrating  Planning 


96  Organization  and  Management 

much  to  sell.     In  this  he  will  be  guided  primarily  by 
considerations  as  to  capacity  of  the  shop. 

He  will  have  to  plan  also  as  to  how  to  sell  the  product. 
This  involves  consideration  of  whether  salesmen  shall  be 
on  a  commission  or  salary  basis,  or  on  a  combination  of 
both.  It  involves  the  question  of  whether  there  shall  be 
branch  offices  or  whether  salesmen  shall  all  have  their 
headquarters  at  the  main  plant.  It  involves  also  the 
routing  or  planning  of  the  visits  of  salesmen  in  advance, 
giving  them  definite  instructions  as  to  whom  to  interview 
and  on  what  days  to  do  this.  It  includes  also  the  ques- 
tion of  advertising  and  how  much  shall  be  expended  so 
as  to  secure  the  best  results. 

Planning  as  to  Production 

The  planning  of  production  in  advance  involves  the 
following  considerations : 

1.  What  work  is  to  be  done. 

2.  What  materials  are  required. 

3.  Where  work  is  to  be  done. 

4.  How  work  is  to  be  done. 

5.  How  long  work  will  take  and  when  it  shall  be  done. 

If  the  shop  superintendent  and  shop  foreman  can  be 
relieved  of  all  of  the  planning  indicated,  they  will  be 
free  to  devote  their  entire  attention  to  carrying  out 
successfully  the  work  in  hand.  However,  in  order  that 
the  planning  may  be  systematically  carried  out,  it  is 
essential  to  classify  it  as  indicated  and  to  make  certain 
department  heads  definitely  responsible  for  such  sys- 
tematic planning. 


Planning  97 

Planning  Department  as  Designed  by  F.  W.  Tayloe 

This  writer  on  shop  management  advocates  four  func- 
tional heads  in  the  planning  department,  namely: 

1.  The  order-of-work  and  routing  clerk. 

2.  The  instruction-card  clerk. 

3.  The  time-and-cost  clerk. 

4.  The  disciplinarian. 

In  addition  to  the  four  leading  functions  which  he  lists, 
he  states  the  following  as  the  activities  of  the  planning 
department : 

1.  The  complete  analysis  of  all  orders  for  machines 
or  work  taken  by  the  company. 

2.  Time  study  for  all  work  done  by  hand  throughout 
the  works,  including  that  done  in  setting  the  work  in 
machines,  and  all  bench  and  vise  work,  transportation, 
etc. 

3.  Time  study  for  all  operations  done  by  the  various 
machines. 

4.  The  balance  of  all  materials,  raw  materials,  stores 
and  finished  parts,  and  the  balance  of  the  work  ahead 
for  each  class  of  machines  and  workmen. 

5.  The  analysis  of  all  inquiries  for  new  work  received 
in  the  sales  department  and  promises  for  time  of  delivery. 

6.  The  cost  of  all  items  manufactured  with  complete 
expense  analysis  and  complete  monthly  comparative  cost 
and  expense  exhibits. 

7.  The  pay  department. 

8.  The  mnemonic-symbol  system  for  identification  of 
parts  and  for  charges. 

9.  Information  bureau. 
10.  Standards. 


98  Organization  and  Management 

11.  Messenger  system  and  post-office  delivery. 

12.  Employment  bureau. 

13.  The  shop  disciplinarian. 

14.  A  mutual  accident-insurance  association. 

15.  Rush-order  department. 

16.  Improvement  of  system  or  plant. 

Modified  Taylor  PiANinNG  Department 

Mr.  Frederick  A.  Parkhurst,  who  applied  Dr.  Taylor's 
principles  to  the  organization  and  management  of  the 
Ferracute  Machine  Company,  Bridgeton,  N.  J.,  puts  the 
planning  department  in  charge  of  a  man  designated  as 
'' production  clerk."  The  production  clerk  has  one  sub- 
stitute, who  assumes  his  duties  during  his  absence. 
Those  employed  in  the  planning  department  proper  are 
as  follows: 

1.  Production  clerk.  7.  Shipping  clerk. 

2.  Shop  engineer.  8.  Receiving  clerk. 

3.  Stores  clerk.  9.  Time  clerk. 

4.  Cost  clerk.  10.  Schedule  clerk. 

5.  Route  clerk.  11.  Factory  mail  boy. 

6.  Order-of-work  clerk.  12.  Time  boy. 

In  addition  to  the  above,  but  directly  responsible  to  the 
production  clerk,  the  shop  employs  the  following: 

1.  Inspector. 

2.  Stores  keeper. 

3.  Move-material  boss. 

The  three  last  named  are  all  functional  foremen,  each 
having  specific  duties  which  are  clearly  defined  in  writing 
and  which  may  bring  all  of  them  successively  in  touch 
with  each  and  every  man  in  the  shop.    They  practically 


Planning  99 

form  the  shop  representatives  of  the  planning  depart- 
ment, which  really  controls  and  runs  the  shop  through 
them.  Those  employed  in  the  planning  department  are 
likewise  filling  functional  positions. 

Separation  of  Planning  from  Routine  Activities 

An  inspection  of  the  various  activities  listed  above 
under  the  general  supervision  of  the  so-called  ' '  planning 
department"  shows  that  those  collected  by  Taylor  and 
Parkhurst  under  one  general  head  not  only  have  to  do 
specifically  with  the  planning  of  production  in  advance, 
but  involve  routine  production  records  and  statistics 
collected  by  various  individuals  who  secure  continuous 
running  data  for  the  guidance  of  the  men  who  are 
actually  engaged  in  the  planning  ahead,  on  the  one  hand, 
and  certain  other  individuals  who  see  that  the  produc- 
tion is  carried  out  in  accordance  with  the  planning.  It 
follows  that,  in  a  well-organized  planning  department, 
there  must  be  certain  heads  who  are  free  from  routine 
work  and  who  can  devote  their  entire  energies  to  plan- 
ning and  executing.  Figure  32  endeavors  to  emphasize 
the  distinctly  planning  and  executing  functions. 

The  chart  in  this  figure  places  the  works  manager  in 
charge  of  the  planning  department.  The  title  "works 
manager"  is  more  suitable  than  that  of  ''production, 
clerk."  The  so-called  "production  clerk"  in  the  Taylor 
and  Parkhurst  organizations  is,  in  fact,  the  works 
manager.  Figure  32  also  gives  the  titles  "production 
manager, "  "  stores  manager, "  "  route  manager, "  "  time- 
study  manager,"  and  " order-of-work  manager"  to  the 
men  who  must  do  the  actual  planning  in  these  important 
activities. 

To  pick  out  the  best  foremen  or  department  heads  in 
an  industry  and  then  designate  them  merely  as  "clerks" 


100  Organization  and  Management 

or  * '  bosses '  *  looks  too  much  like  a  come-down  to  the  men, 
whereas,  if  they  are  called  by  the  titles  indicated,  they 
will  feel  that  they  have  had  a  promotion.  There  is  no 
more  danger  of  their  having  exaggerated  ideas  of  their 
importance  through  receiving  these  titles  than  is  the  case 
in  the  large  department  stores,  which  long  since  adopted 
the  title  "department  manager"  as  the  most  desirable 
one. 

Planning  Work  in  the  Shops 

Reference  to  Figure  32  shows  that  this  function  is 
allotted  to  the  production  manager,  who  is  the  first 
assistant  to  the  works  manager  and  takes  the  latter 's 
place  as  head  of  the  planning  function  in  his  absence. 
He  secures  his  data  from  the  sales  department,  the  de- 
signing department,  the  order  department,  and  the 
manufacturing  committee,  and  censorizes  all  of  the 
so-called  ''automatic  replenisliment"  of  standard  stock- 
production  orders  that  come  up  as  a  development  of  the 
balances  shown  by  the  perpetual  inventory  of  stores. 
From  his  contact  with  the  sales  department  and  designing 
department  he  will  be  in  a  position  to  know  what  items 
are  likely  to  become  obsolete  and  what  items  will  prob- 
ably be  in  strong  demand. 

PLANNING   MATEBIALS   FOR   SHOP   ORDERS 

In  Chapter  VI  were  detailed  the  various  departments 
and  statistics  that  dealt  with  materials.  To  co-ordinate 
all  of  these  statistics  and  records  and  to  see  that  all 
requirements  are  properly  taken  care  of,  there  needs 
to  be  a  functional  head  who  has  no  routine  duties  but 
is  free  to  plan  and  execute  with  reference  to  material 
requirements.  Figure  32  centers  this  responsibility  on 
the  stores  manager.  He  secures  from  the  bill-of-material 


Planning  101 

department  data  as  to  materials  needed,  from  the  clerks 
in  his  own  department  as  to  balances  on  hand  and  what 
has  to  be  bought  or  made,  and  from  the  purchasing 
department  as  to  outward  or  purchase,  orders  and  de- 
liveries promised  on  the  same. 

PLANNING    WHERE   WORK   IS   TO   BE  DONE 

This  responsibility  is  centered  in  the  route  manager 
in  Figure  32.  He  secures  his  data  from  his  own  depart- 
ment. He  needs  to  be  supplied  with  exhaustive  informa- 
tion as  to  the  equipment  and  processes  of  the  industry. 
He  should  be  a  technical  man,  so  far  as  the  processes  are 
concerned.  He  is  assisted  by  having  models  and  draw- 
ings of  the  plant  showing  the  location  of  equipment  and 
the  process-maps.  His  department  designates  what 
department  and  what  machine  or  group  of  similar 
machines  will  have  to  perform  operations  on  each  order. 
He  secures  from  the  production  department  data  as  to 
orders  in  hand.  He  issues  standard  route  sheets  for 
standard  product  and  has  new  route  sheets  prepared  for 
new  pieces,  groups,  or  product. 

These  route  sheets  are  of  two  classes:  (1)  individual- 
piece  route  sheets;  (2)  general  route  sheets.  Individual- 
piece  route  sheets  list  the  operations  and  machines  re- 
quired for  making  an  individual  piece.  For  the  sake  of 
economy  of  time  and  space  as  well  as  to  avoid  unnecessary 
publicity,  mnemonic  symbols  are  generally  used  to 
designate  the  names  of  the  operations  and  the  names 
of  the  machines  involved. 

Individual-piece  route  sheets  can  be  put  on  card 
indexes  for  general  reference,  and  they  may  be  advan- 
tageously reproduced  in  the  lower  right-hand  corner  of 
detail  drawings  blue-printed  for  shop  use.  Figure  33 
shows   a   detail   route   sheet   of   this   form     It   will   be 


102 


Organization  and  Management 


noticed  that  it  gives  first  the  complete  name  of  the  piece ; 
second,  its  mnemonic  symbol,  this  being  the  abbreviation 
by  which  it  is  designated  on  work  and  material  orders. 
Then  follow  the  operations  listed  in  regular  sequence, 
separated  by  the  natural  dividing-line  between  the  work 
done  by  one  man  and  the  work  done  by  the  next  man  to 
whom  the  work  is  passed.  For  each  operation  there  is  an 
abbreviation  or  mnemonic  symbol.  The  tool  symbol  indi- 
cates the  machine,  vise,  or  fitting  space  to  which  the 
route  department  assigns  the  piece.  The  last  column 
refers  to  a  specific  instruction-card  number. 


Piece 

DETAIL  ROUTING 

Namp      WrlBt  Plate  Stand  Pin 

Piece 

Symbol  P  w  P  s 

18 

for  12"   cyllndore 

Operation 

No. 

Operation  Name. 

Operation 
Symbol 

Tool 
Symbol 

Instruction  No, 

1 

Center  &  Hnugh  Pinlah 

era 

L   1 

1621 

« 

Grind 

a 

a  e 

1622 

s 

Fit 

P 

F  fi 

1623 

4 

Drill  4  Tap 

DT 

D  3 

1624 

Fig.  33. — Detail  or  Individual-Piece  Route  Sheet  or  Card,  Often  Listed  on 

Blueprints 

The  instruction  card  is  a  detailed  expansion  of  the 
operation.  For  each  operation  there  may  be  from  twenty 
to  a  hundred  distinct  motion  and  time  elements  which 
are  detailed  on  the  instruction  card.  The  extent  to  which 
the  instruction  card  goes  into  detail  will  vary  with  the 
nature  of  the  business. 

PLANNING    HOW    WOEK    IS    TO   BE    DONE 

This  responsibility  is  centered  in  the  time-study  and 
instruction-card  manager.    After  the  detail  route  sheets 


Pla/nning  103 

are  prepared,  the  time-study  and  mstniction-card  depart- 
ment consults  its  records  to  see  whether  time  studies  and 
instructions  are  available  for  every  item.  In  case  they 
are  not,  such  as  are  deemed  necessary  are  made  and 
detailed  instructions  are  written  up  on  the  basis  they 
afford  when  combined  with  standard  time  elements  on 
file. 

A  detailed  discussion  of  the  principles  and  methods  of 
time  and  motion  studies  and  their  relation  to  instruction 
cards  and  labor  efficiency  is  given  in  a  later  chapter. 

PLANNING   WHEN   WORK   IS   TO   BE   DONE 

The  responsibility  of  planning  how  long  work  will  take 
and  at  what  time  it  will  be  completed  is  centered  in  the 
order-of-work  manager.  He  secures  from  the  sales 
department  and  order  department  data  as  to  when  work 
is  wanted,  and  is  in  turn  consulted  by  them  as  to  the  time 
at  which  delivery  can  be  guaranteed.  He  secures  data 
from  the  cost  department  as  to  how  much  actual  time 
has  been  consumed  in  the  past,  not  only  in  the  actual 
work  on  certain  types  of  product,  but  as  to  the  elapsed 
time  between  the  beginning  of  work  and  its  completion. 
From  the  records  in  his  own  department  he  has  positive 
knowledge  as  to  the  work  ahead  at  each  bench,  machine, 
or  other  production  center.  These  dates  are  posted  on 
a  record  in  which  a  card  or  sheet  is  kept  for  each  machine, 
vise,  or  other  production  center.  Such  a  form  is  illus- 
trated in  Figure  34.  The  postings  on  this  form  indicate 
the  balance  of  work  ahead  at  each  production  center. 

As  a  result  of  investigating  these  balances,  a  definite 
date  is  determined  at  which  each  individual  part  will 
leave  each  machine  or  production  center.  These  dates 
are  then  posted  on  a  so-called  general  * '  route-and-time 
sheet,"  one  of  these  being  prepared  for  each  group  or 


104 


Organization  and  Management 


completely  assembled  machine  or  other  product.  This 
form  is  illustrated  in  Figure  35.  At  the  left-hand  side 
of  the  form  are  listed  in  a  column  the  symbols  of  the 
various  pieces  which  go  to  make  up  the  group.    To  the 


WORK  ASSIGNED  TO  MACHINE 

Nc 

>. 

Work  Assigned  to  be  Added 

Bcilance 

Hrs.  Work 

Ahead 

Work  Completed  to 
be  Deducted 

Order 
No. 

Piece 
Symbol 

Time 
Allowed 

Order 

No. 

Piece 

Symbol 

Time 
Taken 

^^ 

_ 

Fig.  34. — Record  for  BJeeping  Balance  of  Work  Ahead  at  Each  Machine, 
Vise,  or  Other  Production  Center 


GENERAL  ROUTE  AND  TIME  SHEET 

For          Oorltai  wrl«t  riataii  for  la*  orllM«r« 

Order  No.                                   J«™                               Required  by       e/is/iJ                             No.  Pa.        W 

Tool  Symbols  and  Dales  Due 

B 

D 

F      1     G      1     L 

M 

P 

S           1 

1 

1 

3 

fML 

iT 

2 

3 

dc. 

1 

2 

«c 

I 

2 

cic.    1 

2 

tK. 

1 

etc. 

1 

etc. 

1 

2 

3 

etc 

>  •  P  8     18 

^f. 

^0 

}ie 

\i 

„^,^^^ i 

. 



_ 



_ 

u 

_ 



__ 

Fig.  35. — Becord  of  Date  at  Which  Each  Component  Part  Is  Due  at  Each 
Machine,  Vise,  or  Other  Production  Center 


right  are  other  columns  in  which  are  listed  the  various 
separate  machines,  vises,  and  production  centers  of  the 
plant,  a  separate  column  for  each  one.  In  the  illustration 
these  colamns  have  been  condensed.  In  a  shop  having 
a  large  number  of  machines,  this  form  may  have  to  be 


Fig.  36.— Shop  Bulletin  Board  on  Which  are  Listed  at  the  Left  the  Assign- 
ments  to   Specific   Machines,  Benches,   or   Other  Production   Centers 
of  Workmen  in  the  Department,  and  at  the  Eight  the  Work  Ahead 
at  that  Machine,  Bench,  or  Other  Production  Center 


Fig.  37. — Planning  Department's  Office  Bulletin  Board  for  Scheduling  or 

Dispatching  Purposes,  Showing  Work  in  Process  and  Ahead  at 

each  Machine,  Bench,  or  Other  Production  Center 


Planning  105 

wide  enough  to  fold  or  it  may  be  composed  of  several 
sheets  fastened  together.  The  date  at  which  the  piece 
is  expected  to  leave  each  production  center  is  then  indi- 
cated in  the  proper  column  as  shown. 

It  is  the  duty  of  the  order-of-work  manager  to  see  that 
each  job  is  begun  in  the  order  in  which  his  department 
has  designated.  He  is  assisted  in  this  work  by  the  use 
of  bulletin  boards.  In  each  department  there  are  two 
bulletin  boards.  The  first  (Fig.  36)  shows  what  work 
each  man  is  doing.  At  the  left-hand  side  of  this  bulletin 
board  are  listed  the  names  of  the  men  in  the  department 
together  with  their  check  or  clock  numbers.  Opposite 
each  man's  name  is  the  symbol  of  the  machine  or  pro- 
duction center  to  which  he  is  assigned  together  with  the 
numbers  of  certain  hooks  on  the  bulletin  board  on  which 
hang  little  paper  slips  indicating  the  jobs  assigned. 

The  second  bulletin  board  (Fig.  37)  has  a  series  of 
three  hooks  for  each  machine  or  production  center  in  the 
department.  The  upper  hook  has  hanging  on  it  the  job 
on  which  the  man  is  working.  The  next  hook  has  jobs 
ahead  at  the  machine  or  production  center  in  the  order 
in  which  they  are  to  be  worked.  The  third  hook  has  jobs 
to  be  worked  at  in  the  future,  but  w^hich  are  not  as  yet 
at  the  machine. 

In  the  central  office  of  the  planning  department,  at  a 
window  which  opens  out  on  the  main  shop  floor  and  is 
connected  by  chutes  to  the  other  shop  floors,  is  a  master 
board  containing  duplicates  of  the  three-hook  type  of 
bulletin  board  for  each  department  or  section  of  the  shop. 
As  work  is  completed,  the  slips  of  paper  representing 
w^ork  at  the  machine  are  removed  by  the  workmen,  checked 
by  the  gang  boss  or  time  clerk,  and  brought  to  the  window 
of  the  planning  department,  where  the  correctness  of  the 


106 


Organization  and  Management 


procedure   is   verified   and   the   progress    of   the   work 
recorded  on  the  tracing  sheet  illustrated  in  Figure  38, 

An  alternate  method  is  to  have  a  clock  stamp  at  each 
foreman's  or  gang  boss's  headquarters  to  enable  hun  to 
stamp  the  time  of  completing  each  job.     The  move- 


INDIVIDUAL  PART  TRACING  P 

£COF 
Pie 

ID 
^    .  ,  P  W  P  8      132 

P,prr  MAMP.     ''^Ist  Pl^te  Stand  Pin 
for  12"cylindera 

o.M,,N.        1625                           R«,-HK„S/15/1S              ^„  p,.       10 

OPERATIONS 

Material 
Moved 

Operation 
Performed 

Inspected 

DR.\WING  FINISHED 

PATTERN  MADE 

MATERIAL  ORDERED 

MATERIAL  IN  STORES 

ROUTING  READY 

INSTRUCTION  CARD  READY 

TOOL  LIST  READY 

SKETCH  READY 

DETAILED  OPERATION  SYMBOLS: 

CFR 

G 

F 

DT 

U . _ . — — , 

■ N 

FiQ.   38. — Tracing  Eecord,  Showing  Progress  of  Work  on  each   Piece 
The  heavy  black  line  shows  how  far  the  work  has  progressed. 

material  man  on  his  regular  trip  takes  completed  work 
to  the  next  operator  or  department,  carrying  the  job  slips 
for  completed  work  to  the  planning  or  production  office 
window.    This  latter  method  does  away  with  the  neces- 


Plarming  107 

sity  of  having  the  workmen  or  mechanics  spend  any  time 
in  carrying  the  slip  to  the  ^vindow. 

Planning  as  to  Employment 

Responsibility  in  this  field  is  centered  in  the  employ- 
ment manager  or  superintendent.  He  secures  from  the 
production  manager  and  the  order-of-work  manager  data 
as  to  the  amount  of  work  ahead  and  when  it  is  to  be 
completed,  and  he  determines  when  he  must  put  on  addi- 
tional men  and  when  he  must  lay  off  men.  With  well- 
organized  planning,  however,  these  fluctuations  in  the 
number  of  employes  will  be  smaller  than  under  traditional 
management.  Planning  as  to  employment  involves  the 
consideration  of  the  kind  of  labor  to  use.  The  labor  force 
may  consist  of: 

Men 

Women 

Children 

A  careful  analysis  of  the  work  and  of  the  working  con- 
ditions is  required  to  make  an  intelligent  choice  along 
this  line.  Economic,  humanitarian,  and  legal  conditions 
must  be  balanced  against  each  other.  Natural  aptitudes, 
physical  endurance,  permanence  of  employment,  initia- 
tive, problems  of  supervision,  labor-union  activities,  and 
similar  matters  should  be  taken  into  consideration.  Each 
class  has  some  special  advantages  and  the  wise  employer 
will  not  overlook  them. 

Even  more  subtle  employment  factors  must  be  adjusted 
to  the  employment  problem.  Standards  should  be  used 
as  to  the  degree  of  mental  and  physical  energy  required 
in  the   work.     A   rough  classification   as  to  skilled  or 


108  Organization  and  Management 

unskilled  labor  is  desirable.  This  requires  an  analysis 
of  the  exact  demands  of  each  machine  in  operation.  Some 
machines  require  mere  supervision  over  supplies,  the 
attendant  doing  simple  unskilled  labor.  Others  require 
simple  adjustments  to  be  made  from  time  to  time.  Still 
others  require  a  high  degree  of  skill  and  considerable 
training  in  the  correct  operation  of  the  machine.  With 
all  of  this  information  at  hand,  the  employment  manager 
is  able  to  specify  pretty  definitely  the  kind  of  labor  that 
he  wants  much  in  the  same  manner  that  the  purchasing 
agent  uses  his  standardized  specifications  of  materials. 

The  question  of  wage  payment  might  well  be  included 
in  planning  as  to  employment.  It  makes  considerable 
difference  whether  time,  piece,  premium,  bonus,  differ- 
ential piece  rate,  or  other  systems  of  wage  pajnnent  are 
used.  Decision  must  be  made  as  to  whether  the  job  is  to 
be  treated  on  a  salary  or  on  a  wage  basis. 

The  employment  manager  must  be  planning  as  to  where 
he  can  get  additional  help  to  fill  new  places  or  to  fill  the 
places  of  men  who  are  leaving.  He  ^vill  assign  a  man 
to  continuous  duty  on  this  important  question,  as  well  as 
on  the  matter  of  individual  efficiency  of  the  various  m^n 
in  the  shop.  He  will  plan  with  regard  to  welfare,  social, 
educational,  and  athletic  activities  among  employes, 
assigning  a  capable  man  to  this  work.  A  more  completely 
detailed  description  of  methods  in  this  field  is  given  in  a 
later  chapter. 

Does  PiANinNG  Mean  Additional  Non-productive 

Labor? 

A  superficial  examination  of  planning  methods  fre- 
quently misleads  proprietors,  managers,  and  superinten- 


Plannhiff  109 

dents  accustomed  to  traditional  methods,  so  that  they 
form  the  opinion  that  planning  means  exceedingly  high 
overhead  expense.  In  actual  practice,  however,  it  has 
resulted  in  remarkably  increased  production  with  the 
same  number  of  men  and  machines.  Under  an  efficient 
systena  of  planning  no  new  work  is  introduced  into  a 
business  enterprise.  It  means  simply  the  scientific  dis- 
tribution of  the  planning  work  engaged  in  under  tradi- 
tional management  by  all  classes  of  foremen  and  clerks. 
A  scientific  planning  system  introduces  the  principle  of 
specialization  of  labor  to  the  work  of  planning  by  allot- 
ting to  each  man  the  kind  of  work  to  which  he  is  best 
adapted. 

At  the  plant  of  the  Tabor  Manufacturing  Company, 
in  Philadelphia,  the  introduction  of  a  planning  depart- 
ment resulted  in  an  almost  doubled  output  without  any 
increase  in  the  total  number  of  employes  or  equipment. 
However,  it  is  important  to  bear  in  mind  that  the  members 
of  the  planning  or  production  department  are  not  clerks 
or  experts  hired  from  outside,  but  are  the  very  best  men 
already  in  an  existing  organization.  For  this  reason  it 
is  desirable  to  use  the  title  "department  manager"  rather 
than  the  designation  "clerk"  or  "boss." 

The  designation  "planning  department"  is  also  apt 
to  be  somewhat  misleading,  since  planning  has  to  be  done 
by  all  of  the  leading  officials  and  department  managers. 
To  be  sure,  the  works  manager's  office  and  the  subsidiary 
department  managers  under  him  do  most  of  the  strictly 
shop  planning,  but  the  chart  in  Figure  32  shows  that 
equally  important  planning  must  be  done  by  other  offi- 
cials. The  principles  involved  are  the  same  in  the  case 
of  each  department  or  official  considered.  The  important 
department  head  or  official  must  be  left  free  from  detail 
routine,  in  order  that  he  may  tliink  and  plan,  but  there 


110  Organization  and  Management 

must  be  thoroughly  systematized  methods  of  having 
available  data  to  help  him  in  his  thinking  and  planning, 
as  it  is  only  through  the  combination  of  these  conditions 
that  he  can  accomplish  satisfactory  results. 


TEST  QUESTIONS 

1.  "What  sort  of  planning  in  advance  by  the  general  manager 
is  essential  ? 

2.  What  sort  of  planning  in  regard  to  finances  must  be  car- 
ried on  by  the  treasurer  or  comptroller? 

3.  Discuss  the  kind  of  planning  as  to  sales  which  must  be 
carried  on  in  the  sales  manager's  office. 

4.  What  considerations  are  to  be  covered  by  the  planning  as 
to  production? 

5.  Describe  the  planning  department  as  designed  by  F.  W. 
Taylor. 

6.  How  does  the  planning  department  as  used  by  Frederick 
A.  Parkhurst  differ  from  that  designed  by  F.  W.  Taylor? 

7.  Draw  a  chart  showing  the  organization  of  a  planning  de- 
partment in  the  production  division. 

8.  What   data   and  methods   are   involved   in   planning  the 
work  to  be  done  in  the  shops? 

9.  What  data  and  methods  are  necessary  to  plan  for  materials 
required  for  shop  orders? 

10.  What  information  is  necessary  to  plan  intelligently  where 
work  is  to  be  done  ? 

11.  What  information  is  necessary  in  order  to  plan  how  work 
is  to  be  done? 

12.  What  information  is  necessary  in  order  to  plan  how  long 
work  will  take  and  at  what  time  it  will  be  completed  ? 

13.  What  justifies  the  additional  overhead  expense  involved 
in  installing  a  planning  department? 

14.  What  planning  should  be  done  with  regard  to  employment 
questions  ? 


Planning  111 

15.  Why  could  not  the  superintendent  and  foreman  attend  to 
all  the  shop  planning? 

16.  What  is  left  for  the  shop  foreman  to  do  when  the  planning 
is  all  done  by  others  ? 

17.  Do  members  of  the  planning  division  give  orders  directly 
to  men  in  the  shops?    If  not,  how  are  their  orders  carried  out? 

18.  Do  you  think  workmen  in  a  shop  having  a  planning  di- 
vision would  be  likely  to  quit  on  account  of  having  too  many 
bosses? 

19.  If  you  were  about  to  establish  a  planning  division  where 
would  you  go  to  look  for  men  to  fill  the  positions  of  route  clerk, 
order-of-work  clerk,  and  instruction-card  clerk? 

20.  Do  you  think  planning-department  principles  could  be 
applied  to  one's  personal  private  life?     If  so,  how? 


CHAPTER  VIII 
thz:  determination  of  costs 

Inaccurate  or  Inadequate  Costs 

Almost  every  industrial  establishment  carries  on  some 
kind  of  system  of  records  relating  to  costs,  yet  it  is 
notoriously  true  that  the  most  important  members  of  the 
managing  staffs  of  these  establishments  have,  as  a  rule, 
a  very  meagre  knowledge  of  the  elements  which  go  to 
make  up  the  costs  of  their  product.  Frequently  they  have 
still  less  knowledge  of  the  detailed  items  of  cost  involved. 
Generally  they  have  given  but  little  thought  to  the  ques- 
tion of  whether  the  cost  methods  which  they  are  following 
are  those  best  adapted  to  their  particular  industry. 
Frequently  they  may  be  of  the  opinion  that  they  are 
using  the  best  possible  cost  system  for  their  business. 

However,  this  opinion  is  often  the  result  of  self-satis- 
faction and  does  not  at  all  arise  from  a  thorough 
comparative  study  of  cost-keeping  as  a  whole.  Even 
after  such  a  general  study  many  fail  to  make  an  adequate 
application  of  cost-keeping  methods  to  their  particular 
industry. 

Probably  the  chief  reason  for  inaccurate  cost  systems 
is  that  the  subject  of  cost  accounts  has  not  received 
extensive  and  exhaustive  attention  on  the  part  of  the 
management.  In  the  average  business  the  tremendous 
advantages  to  be  gained  from  scientific  cost-accounting 

112 


Determination  of  Costs  113 

methods  in  the  way  of  cost  reductions  are  not  realized 
As  a  rule,  only  two  purposes  are  served  by  the  traditional 
cost  system.  These  two  purposes  are  among  the  very 
least  of  those  which  can  and  should  be  served  by  a 
scientific  cost  system.  They  are  as  follows:  (1)  The 
traditional  cost  system  gives  the  billing  department  some 
land  of  basis  for  establishing  prices  on  repair  parts; 
(2)  it  also  furnishes  retrospective  information  to  the 
superintendent  when  a  job  has  apparently  cost  a  great 
deal  more  than  the  same  or  a  similar  job  cost  according 
to  previous  records. 

Another  reason  for  inaccurate  costs  is  that  the  work 
of  cost-keeping  is  left  to  poorly  paid  clerks.  The  head 
of  the  cost  department  is  usually  burdened  with  so  many 
duties  and  so  much  routine  work  that  he  has  no  oppor- 
tunity to  plan  or  study.  It  is  quite  customary  for  a 
corporation  with  a  business  of  a  million  dollars  a  year 
to  have  a  thousand-dollar-a-year  cost-department  head, 
although  the  head  accountant  and  purchasing  agent  are 
paid  three  times  this  salary.  A  company  doing  a  business 
of  a  million  dollars  a  year  could  unquestionably  get  far 
bettor  results  with  a  cost  department  consisting  of  a 
head  at  three  thousand  dollars,  a  first  assistant  at  fifteen 
hundred  dollars,  and  two  clerks  at  a  thousand  dollars, 
making  a  total  of  sixty-five  hundred  dollars,  than  could 
be  secured  with  a  cost  department  in  which  the  head  is 
paid  a  thousand  dollars,  and  having  ten  clerks  at  six 
hundred  dollars  each,  making  a  total  expenditure  of 
seven  thousand  dollars. 

Need  of  Accukatb  Costs 

The  need  of  accurate  costs  is  thoroughly  demonstrated 
when  manufacturers  of  similar  commodities,  such  as 
machine  tool  builders  or  furniture  builders  or  shoe  manu- 


114  Organization  and  Management 

facturers,  get  together  and  discuss  cost  accounting. 
Different  cost  systems,  as  will  be  later  demonstrated  by 
numerical  examples,  result  in  the  most  widely  fluctuating 
apparent  costs,  leading  to  absurdly  ruinous  competition, 
the  tendency  being  always  to  meet  the  lowest  selling  price 
offered. 

In  the  metal  trades  a  common  example  of  absurd  com- 
petition is  afforded  when  an  establishment  which  has 
been  building  a  limited  line  of  medium-weight  machines 
undertakes  to  build  hea\'y  machinery,  adding  powerful 
machine  tools  to  its  equipment  for  the  purpose  of  getting 
out  the  heavier  line  of  output.  Instead  of  devising  a 
proper  redistribution  of  operating  expenses,  allotting 
the  proper  machine  rates  and  departmental  expense  rates 
to  the  machines  and  departments  working  on  the  heavier 
line  of  machines,  the  same  old  expense  percentage  is 
added  as  was  reckoned  on  the  former  general  line  of  out- 
put, resulting  in  an  apparent  cost  that  will  enable  the 
company,  according  to  these  erroneous  figures,  greatly  to 
underbid  old  established  concerns  building  heavy  ma- 
chinery. At  the  end  of  a  year  the  total  expenses  will  be 
seen  to  have  run  up,  and  the  uniform  distribution  of 
manufacturing  expense  will  now  make  the  standard 
lighter  product  apparently  cost  so  much  that  it  cannot 
be  sold  at  the  old  prices.  Prices  are  raised  on  the  old 
line  and  business  lost.  This  procedure  has  been  gone 
through  with  in  a  number  of  instances  by  companies 
engaged  in  the  steam-engine  and  the  electric  motor  and 
dynamo  business,  with  business  failures  as  the  finish  of 
undertakings  based  on  inaccurate  costs. 

Cost  as  a  Basis  of  Selling  Prices 

In  most  competitive  lines  of  business  it  is  quite  true 
that  in  the  past  competitors'  prices  have  controlled  selling 


Determination  of  Costs  115 

prices.  Accurate  cost  systems,  however,  will  disclose 
which  particular  items  are  the  ones  on  w^hich  the  largest 
profits  are  possible,  for  naturally  the  trade  in  these  items 
will  be  the  trade  w^hich  the  sales  department  will  wish 
to  develop.  At  the  same  time,  the  most  profitable  items 
may  not  be  the  ones  which  are  in  greatest  demand.  From 
the  standpoint  of  sales  policy  we  must  make  the  most 
desirable  goods  at  as  low  prices  as  our  competitors  do, 
and  preferably  with  some  features  which  will  make  them 
more  desirable  than  the  competitors'  goods.  The  value 
of  accurate  costs  has  in  the  past  been  overlooked  by  many 
successful  managers  for  the  reason  that  in  many  cases 
success  has  been  due  more  to  fortuitous  circumstances, 
such  as  natural  advantages  of  location,  transportation, 
and  priority  in  the  business,  than  to  efficient  business 
methods. 

Wastes  Disclosed  by  a  Cost  System 

Comparative  costs  of  the  material  and  labor  entering 
into  the  same  item  made  at  different  times  will  reveal 
at  all  future  times  any  overrunning  of  past  averages. 
If  these  past  averages  have  been  supplemented  by  time- 
and-motion  studies,  and  standard  costs  predetermined  as 
a  basis  of  current  performances,  it  becomes  possible  to 
detect  current  wastes  as  they  occur,  instead  of  in  a 
retrospective  manner.  A  good  system  of  classified  stand- 
ing-expense orders  closed  monthly  and  compared  month 
by  month  will  show  also  any  fluctuations  in  the  classified 
expenses.  The  study  of  expenses  thus  brought  about  will 
result  in  the  avoidance  of  wastes. 

Lower  Production  Costs  Necessary 

The  entire  history  of  manufacturing  consists  of  a 
record  of  improved  processes  involving  shorter  times  of 


116  Organization  and  Management 

production,  decreased  power  and  supply  bills,  and  a 
smaller  proportion  of  waste.  The  principal  factors  which 
have  been  incentives  to  the  inventor  and  works  manager 
in  bringing  about  this  condition  are  increased  competi- 
tion, widening  sales  markets,  and  longer  transportation 
distances. 

About  the  middle  of  the  nineteenth  century,  when 
notable  improvements  were  made  in  textile  machinery 
increasing  the  output  per  man,  there  was  much  fear  that 
there  would  not  be  enough  work  to  go  around.  In  Man- 
chester, England,  mills  were  burned  and  machinery 
destroyed  by  mobs.  Subsequent  developments  in  the 
textile  industry  have  proved  that  these  fears  were 
entirely  groundless,  for  today's  machinery  produces  an 
output  per  man  eight  times  larger  than  was  produced 
by  the  machinery  of  1840,  while  the  number  of  textile 
workers  in  Manchester  is  six  times  the  number  engaged 
in  this  field  in  1840.  The  history  of  industry  shows  that 
the  increased  output  per  man,  as  a  whole,  has  resulted  in 
a  greater  demand  for  the  article  by  reason  of  lessened 
selling  prices. 

Meanwhile,  increased  purchasing  power  of  the  com- 
munity as  a  whole  has  resulted  in  entirely  new  in- 
dustries, which  have  quickly  absorbed  the  less  capable 
workers  temporarily  out  of  work  in  certain  lines  of  indus- 
try where  improved  machinery  resulted  in  a  greater 
output  per  man,  and  the  demand  did  not  increase 
immediately  at  a  sufficient  rate  to  justify  the  emplojrment 
of  all  of  the  previous  workers.  This  last-named  condi- 
tion is  the  exception,  however.  About  the  only  examples 
of  it  which  can  be  cited  are  those  of  the  linotype  machine 
in  the  printing  trade,  which  took  the  place  of  the  hand 
type-setters,  and  of  the  glass-blowing  machines  which 
are  being  installed  in  bottling  works. 


Determination  of  Costs  117 

The  profits  in  an  industry  may  be  increased  by  (1) 
increasing  the  selling  prices  wdth  stationary  or  lowered 
costs  of  production,  (2)  by  increase  in  quantity  of  sales 
with  the  same  plant  and  equipment,  or  (3)  by  decreasing 
the  cost  of  production  under  either  of  the  first  two 
assumptions. 

Unfortunately,  the  tendency  in  some  industries  has 
been  to  maintain  selling  prices  even  in  the  face  of  lower 
costs  of  production.  In  order  to  secure  a  uniform  dis- 
tribution of  wealth  and  greater  general  purchasing 
power  in  the  nation,  it  is  absolutely  essential  that  lessened 
production  costs  be  accompanied  by  lower  selling  prices ; 
otherwise,  the  lack  of  uniform  distribution  of  wealth  mil 
lead  to  a  decreased  general  demand  for  commodities  of 
all  kinds,  which  demand  is  the  basis  of  continued  manu- 
facturing activity. 

Cost  of  Repair  and  Detailed  Parts 

The  establishment  of  correct  prices  on  repair  parts  and 
minor  details  is  greatly  facilitated  by  accurate  cost  sys- 
tems. It  stands  to  reason  that  a  company  making 
individual  parts  in  quantity  is  in  position  to  make  a 
considerable  profit  on  these  individual  parts,  since  the 
selling  price  need  be  only  slightly  less  than  that  offered 
by  a  job  shop  which  would  have  to  make  the  parts  singly 
and  consequently  at  a  much  greater  cost  than  the  manu- 
facturing establishment.  Moreover,  the  manufacturing- 
establishment  making  them  in  quantity  and  having  them 
in  stock  can,  under  ordinary  circumstances,  make  immedi- 
ate delivery  of  all  standard  repair  parts. 

Any  cost  system  relating  to  assembled  products, 
therefore,  should  be  built  up  in  such  a  manner  that  the 
costs  of  individual  parts  are  easily  determined.  The 
cost  data  should  be  indexed  and  classified  in  such  a  wav 


118  Organisation  and  Management 

that  quick  and  ready  reference  may  be  made  to  the  data 
relating  to  any  part. 

Correlation  of  Costs  to  Other  Manufacturing  Data 

The  collection  of  the  necessary  statistics  for  records 
involved  in  conducting  a  cost  system  makes  available  data 
which  are  useful  in  guiding  us  in  many  matters  of  manu- 
facturing methods  and  policies.  From  records  of  material 
costs  we  secure  data  as  to  the  promptness  with  which  the 
material  specifications  are  furnished,  the  efficiency  of  the 
store-room  management  in  replenishing  depleted  stocks, 
the  promptness  mth  which  the  shop  can  make  special 
parts,  and  the  accuracy  with  which  the  various  parts  are 
collected  and  issued  for  assembling  and  erecting  pur- 
poses. 

Our  data  in  regard  to  labor  costs  furnish  information 
as  to  productive  capacity  of  various  individual  men  and 
groups  of  men,  as  to  the  accuracy  of  the  time-keeping 
department,  the  effect  of  piece-rate,  bonus,  and  premium 
wage  systems  on  shop  costs. 

The  cost-department  data  with  regard  to  manufactur- 
ing expense  will  disclose  the  economy  or  wastefulness  of 
various  foremen  and  suggest  lines  of  investigation  as  to 
how  certain  expenses  can  be  reduced. 

Comparative  Costs 

Any  complete  cost  system,  in  addition  to  furnishing 
data  on  work  as  it  is  completed,  should  supply  complete 
information  as  to  the  comparative  cost  of  the  same 
process  as  performed  on  similar  orders  in  the  past.  The 
comparative  costs,  together  with  the  standard  or  ideal 
ones — which  are  the  goal  to  be  achieved,  must  be  pre- 
determined and  kept  prominently  before  all  persons  who 
are  to  be  encouraged  to  achieve  the  desired  efficiency. 


Determination  of  Costs  119 

Ketrospective  comparisons  with  former  costs  are  not  of 
much  advantage.  Predetermined  costs,  as  suggested, 
serve  a  very  useful  purpose,  however,  since  they  establish 
a  limit  beyond  which  we  must  not  go,  when  placed  in 
writing  prominently  before  the  workers  and  foremen. 

Classification  of  Costs 

In  a  merchandise  or  trading  business  it  is  quite  cus- 
tomary to  determine  the  costs  of  buying,  handling, 
storing,  and  selling  the  goods  for  any  one  department  by 
means  of  the  receipts  for  that  department.  In  continuous 
manufacturing  types,  whether  analytic  or  synthetic,  such 
as  ore  mills  or  cement  mills,  it  is  usual  to  figure  the  costs 
of  processing  per  unit  of  the  output's  bulk  and  compare 
these  costs  daily,  weekly,  and  monthly.  In  assembling 
types  of  industries,  such  as  the  building  of  machinery 
and  furniture,  it  is  the  rule  to  figure  costs  by  the  individ- 
ual orders,  which  in  turn  are  assembled  costs  consisting 
of  costs  of  detailed  parts,  some  of  which  have  been  made 
in  quantity  on  stock  orders  and  some  of  which  have  been 
made  up  specially  for  a  given  assembling  order. 

Elements  of  Cost 

Figure  39  indicates  the  fundamental  cost  elements. 
Manufacturing  costs  constitute  the  first  group.  They 
consist  of  three  elements:  (a)  material  cost,  (b)  direct 
labor,  and  (c)  manufacturing  expense. 

The  first  element  consists  of  (a)  material  costs.  These 
consist  of  the  invoice  cost  of  raw  materials,  to  which  is 
added  a  factor  known  as  the  ''material  burden,"  cover- 
ing the  cost  of  buying,  transporting,  receiving,  storing, 
issuing,  and  recording  materials.  Frequently  the  mate- 
rial burden  is  added  to  the  invoice  price  for  a  quantity 
of  material  received  and  di^^ded  by  the  quantity  in  order 
to  determine  the  unit  price  for  cost-finding  purposes. 


120 


Organization  and  Management 


Cost 

as  a 

Basis  of. 

Selling 

Prices 


r 

Material  Gjat 
Direct  Labor. 


Manufac- 
turing Cost! 


Invoice  Cost 
Material  Burden 


< 


Manufacturing  Expense  < 


Expense  Material 
Indirect  Labor 
Supervisional  Salaries 
Clerical  Salaries  in  Works 
Fixed  Plant  Charges 
Variable  Plant  Charges 


V_ 


r 


Selling 
Expense 


Salary  of  Sales  Manager 

Office  Expense  in  Selling 

Salesmen's  Salaries  and  Commissions 

Advertising 

Shipping  Department 

Selling  Losses 


r 


....  I     Salaries  and  Elxpenses  of  General  Officers 

Admmistra-/ 
tiveExpense\     Office  Expense 

Deferred  Charojes 


V_ 


Percentage 
for  Profit 


Fig.  39. — Chart  Illustrating  Costs  as  a  Basis  for  Selling  Prices 


Determination  of  Costs  121 

The  next  element  is  (b)  direct  labor.  This  element  con- 
sists of  all  labor  expended  directly  upon  the  order  in 
question.  It  does  not  include  any  indirect  labor,  the  latter 
being  charged  to  expense  order  numbers. 

The  third  element  is  (c)  manufacturmg  expense.  This 
element  consists  of  the  following  subdivisions:  (cl)  ex- 
pense material,  such  as  waste,  machine  oil,  brooms,  etc. ; 
(c2)  indirect  labor  which  cannot  be  charged  directly  to  a 
production  order  and  is  therefore  charged  to  a  certain 
expense  order  of  the  standing-expense  order  series,  as 
explained  in  a  later  chapter;  (c3)  supervisional  salaries 
of  bosses,  foremen,  and  superintendents,  planning-de- 
partment  heads,  and  works  manager;  (c4)  all  clerical  sal- 
aries connected  with  the  works;  (c5)  all  fixed  charges, 
such  as  interest,  depreciation,  taxes,  and  insurance  on 
plant;  (c6)  all  variable  plant  charges,  such  as  power, 
lighting,  heating,  plumbing  repairs  and  maintenance,  etc. 

The  second  group  of  cost  is  selling  expense,  includ- 
ing salaries  of  sales  manager;  cost  of  clerical  work;  sta- 
tionery and  supplies  in  main  and  branch  selling  offices; 
salaries  and  traveling  expenses  of  salesmen,  if  on  a  salary 
basis,  or  commission,  if  on  a  commission  basis ;  all  adver- 
tising expenses;  expenses  of  the  shipping  department; 
and  losses  on  customers'  accounts. 

The  third  group  of  cost  is  administrative  expense, 
and  includes  such  items  as  salaries  and  expenses  of  gen- 
eral officers,  clerical  help,  stationery  and  supplies  in 
administrative  offices,  deferred  charges  relating  to  organ- 
ization expenses,  etc.,  which  must  be  distributed  over 
several  years  and  included  in  selling  prices  of  goods,  if 
we  wish  to  cover  actual  costs. 

Finally,  if  a  cost  price  has  been  determined  by  the  ad- 
dition of  all  the  foregoing  elements,  it  is  necessary  to  add 


122  Organization  and  Management 

a  percentage  for  profit,  which  should  be  not  only  am- 
ple to  cover  dividends  and  surplus,  but  should  be  sufficient 
to  provide  a  factor  of  safety,  so  as  to  counterbalance  er- 
rors in  design  or  construction,  defective  goods,  bad  debts, 
and  ordinary  sources  of  loss  suffered  by  every  business. 
The  amount  to  be  added  for  profit  is  rarely  less  than  20 
per  cent  above  the  manufacturing  cost.  Under  ordinary 
circumstances  it  varies  from  20  to  50  per  cent  on  indi- 
vidual parts,  with  a  tendency  towards  somewhat  lower 
figures  in  the  case  of  assembled  products  subject  to  brisk 
competition.  It  is  not  likely  that  a  concern  wishing  to 
declare  the  dividends  customary  in  industrial  work, 
which  are  usually  7  or  8  per  cent,  will  have  an  exor- 
bitant surplus  left  after  the  addition  of  20  per  cent 
or  higher  on  the  manufacturing  costs  of  individual  parts. 
It  must  be  borne  in  mind  that  manufactured  stocks  of 
parts  depreciate  and  become  obsolete,  and  while  the  de- 
preciation factor  is  not  so  great  a  one  as  in  mercantile 
business,  it  is  nevertheless  very  important. 

From  the  standpoint  of  management,  it  is  imperative 
that  the  several  elements  of  cost  that  make  up  the  selling 
price  should  each  be  kept  separate  and  distinct.  The 
history  of  many  industrial  establishments  shows  that 
they  have  been  exceptionally  strong  in  one  branch  and 
inexcusably  weak  in  another.  Perhaps  production  was 
efficient,  but  selling  was  weak.  Perhaps  both  selling  and 
production  costs  were  low,  but  the  administrative  costs, 
especially  those  relating  to  financing  the  business,  were 
absurdly  high  and  carried  on  under  a  policy  likely  to  be 
ruinous  to  any  establishment.  Unless,  therefore,  the  ele- 
ments of  cost  are  so  kept  that  each  can  be  made  a  subject 
of  investigation,  it  is  difficult  to  lay  the  finger  on  the  weak 
spot. 


Determination  of  Costs  123 

Correlation  of  Cost  Records  and  General  Accounts 

One  of  the  aims  of  every  modern  accounting  system 
is  the  merging  of  all  cost  records  with  the  general  double- 
entry  boolikeeping  system  in  such  a  manner  that  com- 
plete balance  sheets  can  be  presented  monthly.  The  tra- 
ditional type  of  cost  record  made  no  attempt  to  combine 
cost  data  with  general  accounts,  except  once  a  year  at 
the  annual  inventory  time.  Under  traditional  methods, 
the  bookkeeper,  in  order  to  determine  the  profit  or  loss 
in  manufacturing,  kept  certain  controlling  accounts  in 
his  ledger,  such  as  (1)  materials,  (2)  labor,  and  (3)  manu- 
facturing expense.  Each  of  these  controlling  accounts 
probably  had  several  subsidiary  accounts,  particularly 
the  manufacturing-expense  account.  At  the  close  of  a 
fiscal  period  the  subsidiary  accounts  were  closed  into  the 
three  fundamental  controlling  accounts,  and  then  an  in- 
ventory was  taken  of  (a)  materials,  (b)  work  in  process, 
and  (c)  finished  stock. 

The  manufacturing  account  was  now  written  up.  It 
was  debited  (a)  with  the  value  of  work  in  process  at  the 
beginning  of  the  fiscal  year  just  closed,  as  per  last  in- 
ventory; (b)  with  the  total  cost  of  all  labor  which  the 
cost  department  designated  from  month  to  month  to  the 
account  department  as  being  productive  labor;  (c)  with 
the  cost  of  all  raw  materials  reported  as  used  by  the  cost 
department's  records,  the  material  account  being  cred- 
ited with  the  same  amount;  (d)  with  the  total  amount 
of  manufacturing-expense  account  as  it  appeared  in  the 
accountant's  ledger,  no  attention  being  paid  to  any  fig- 
ures which  the  cost  department  might  have  used  to  desig- 
nate expense  burden. 

On  the  credit  side  of  the  manufacturing  account  was 
placed  the  cost  of  goods  in  process  of  manufacturing 
at  the  close  of  the  current  fiscal  period. 


124 


Organization  and  Management 


The  rest  of  the  manufacturing  account  was  intended 
to  show  the  total  expenditure  by  reason  of  manufac- 
turing. 

Modern  accounting  differs  from  the  traditional  type, 
as  indicated,  in  that  a  monthly  balance  sheet  is  demanded 
instead  of  merely  an  annual  statement.  This  demand  re- 
quires the  introduction  of  perpetual  inventories  to  cover 
(a)  material,  (b)  work  in  process,  and  (c)  finished  stock. 
The  methods  of  procedure  can  best  be  illustrated  by  put^ 
ting  the  discussion  into  ledger  form  as  follows: 


MATERIAL    BURDEN 


Debit 

(1)  With  salaries  of  pur- 
chasing agent  and  all  clerks  in 
purchasing  office;  all  station- 
ery, supplies,  traveling  and 
other  expenses  in  purchasing 
department. 

(2)  With  salaries  of  man- 
ager of  stores  department. 
Salaries  of  all  clerks  in  stores 
office  or  other  store  room; 
wages  of  all  labor  employed  in 
handling  and  arranging  store- 
room material;  also  cost  of  all 
stationery  and  other  expenses 
connected  with  the  conducting 
of  the  stores  department. 

(3)  With  salaries  of  receiv- 
ing clerk  and  assistants;  wages 
of  laborers  in  receiving  depart- 
ment. 

(4)  With  freight,  express, 
and  drayage  on  all  materials 
received. 


Credit 

(1)  With  the  amount  of 
material  burden  added  as  a 
percentage  to  invoice  costs  of 
material  received  during  the 
current  fiscal  period.  At  this 
time  debit  material  account 
with  a  like  amount. 


Determination  of  Costs 


125 


MATERL\X,   ACCOUNT 


Debit 

(1)  With  the  total  cost  plus 
material  burden  of  materials 
on  hand  at  the  beginning  of  the 
fiscal  period. 

(2)  With  the  invoice  cost  of 
all  materials  purchased  during 
the  fiscal  period. 

(3)  With  the  amount  of 
material  burden  added  as  a 
percentage  to  invoice  costs  of 
material  received  during  the 
current  fiscal  period.  At  this 
time  material  burden  is  cred- 
ited with  a  like  amount. 


Credit 

(1)  With  goods  applied  to 
work  in  process  as  per  records 
of  withdrawal  from  stores. 
This  procedure  assumes  that 
the  balance-of-stores  clerk  re- 
ceived authorization  covering 
everything  entering  into  work 
in  process. 

(2)  With  any  goods  re- 
turned to  suppliers. 


PAY-ROLL   ACCOUNT 


Debit 

(1)  With,  total  amount  of 
cash  put  by  cashier  in  all  pay 
envelopes  of  men  working  on 
hourly  basis. 


Credit 

(1)  With  such  proportion 
of  pay-roll  as  is  subsequently 
reported  by  cost  department 
to  represent  indirect  labor. 
Charge  at  this  time  manufac- 
turing expense  or  a  subsidiary 
account  for  which  manufac- 
turing expense  is  a  controlling 
account  with  a  like  amount. 

(2)  With  the  amount  subse- 
quently reported  by  the  cost 
department  as  representing  di- 
rect-labor portion  of  the  pay- 
roll. At  this  time  debit  direct- 
labor  account  with  the  same 
amount. 


126  Organization  and  Management 

OreECT-LABOR  ACCOUNT 

Debit  Credit 

(1)  With   the   totals   of  di-  (1)   With    the    total    money 

rect-labor  portion  of  pay-rolls  value  of  direct  labor  to  be 
as  represented  by  cost  depart-  charged  to  work  in  process  in 
ment.  a  given  fiscal  period.     At  this 

time    debit    work    in    process 
with  a  similar  amount. 

Manufacturing   Expense 

As  previously  explained,  there  may  be  but  one  manu- 
facturing-expense account  to  which  all  manufacturing 
expenses  are  charged  as  they  occur,  or  manufacturing 
expense  may  be  an  account  controlling  a  score  or  more 
subsidiary  accounts  which  include  manufacturing  ex- 
penses. The  example  stated  below  is  put  into  simple 
form,  and  although  the  items  composing  manufacturing 
expense  may  not  include  all  classes,  they  are  representa- 
tive of  some  of  the  most  ordinary  items  to  be  found.  The 
ledger  account  given  beloAV  will  therefore  assume  that 
manufacturing  expense  is  not  a  controlling  account,  but 
carries  all  classes  of  manufacturing  expenses  in  the  sin- 
gle account. 

MANUFACTURING   EXPENSE 

Debit  Credit 

(1)  With  the  cost  of  all  ex-  (1)  With  the  total  of  expense 
pense  materials  and  supplies  charged  to  work  in  process 
which  do  not  enter  directly  during  the  current  fiscal  period 
into  the  manufactured  product,  as  per  reports  of  the  cost  de- 

(2)  With  the  proportion  of  partment.  At  this  time  charge 
all  pay-rolls  during  the  current  work  in  process  with  a  similar 
fiscal  period  which  have  been  amount. 

designated  by  the  cost  depart- 


Determination  of  Costs  127 

ment  as  representing  indirect 
or  expense  labor.  At  this  time 
credit  pay-roll  account  with  a 
similar  amount. 

(3)  With  all  supervisional 
salaries  of  gang  bosses,  fore- 
men, and  superintendents.  At 
this  time  credit  salaries  ac- 
count with  a  similar  amount. 

(4)  With  all  clerical  and 
administrative  salaries  in 
works.  At  this  time  credit 
salaries  account  with  a  similar 
amount. 

(5)  If  the  fiscal  period  is 
monthly,  with  one-twelfth  of 
the  fixed  plant  charges.  At 
this  time  credit  fixed  plant- 
charges  account  with  a  similar 
amount. 

(6)  With  such  proportion 
of  variable  plant  charges  for 
the  current  year  as  it  has  been 
decided  shall  be  borne  by  cur- 
rent fiscal  periods.  At  this 
time  credit  variable  plant- 
charges  account  with  a  like 
amount. 

WORK  IN   PROCESS 

Debit  Credit 

(1)  With  the  total  value  of  (1)  With  the  total  manu- 
work  in  process  on  hand  at  faeturing  cost  of  all  work  in 
the  beginning  of  the  fiscal  process  completed  and  trans- 
period,  formed   into   finished   product 

(2)  With  total  amount  of  as  per  records  of  the  cost  de- 
materials  applied  to  work  in  partraent  during  the  current 
process     as     per     records     of  fiscal    period.      At    this    time 


128  Organization  and  Management 

withdrawals  from  stores.     At      debit  finished-product  account 
this   time   credit   material   ac-      with  a  similar  amount, 
count  with  a  similar  amount. 

(3)  With  all  direct  labor 
reported  by  the  cost  depart- 
ment during  the  current  fiscal 
period.  At  this  time  credit 
direct  labor  with  a  similar 
amount. 

(4)  With  all  manufacturing- 
expense  burden  added  to  work 
in  process  during  the  current 
fiscal  period  reported  by  the 
cost  department.  At  this  time 
credit  manufacturing  expense 
witli  a  similar  amount. 

FINISHED   PRODUCT 

Debit  Credit 

(1)  With  the  manufactur-  (1)  With  the  manufactur- 
ing cost  of  all  finished  product  ing  cost  of  all  finished  product 
on  hand  at  the  beginning  of  shipped  or  turned  over  to  the 
the  fiscal  period.  sales    department    or    branch 

(2)  With  the  manufactur-  offices  during  the  current  fiscal 
ing  cost  of  all  work  in  process  period. 

which  has  been  transformed 
into  finished  product  during 
the  current  fiscal  period.  At 
this  time  credit  work  in  process 
with  a  similar  amount. 

(3)  With  the  manufactur- 
ing cost  of  all  returned  goods. 

DlFFEREl^rCE  BETWEEN   MaNUFACTUEING  CoST 

AND  Selling  Cost 

As  previously  explained  under  the  heading  '  *  Elements 
of  Cost,"  the  total  cost  will  vary  from  manufacturing 


Determination  of  Costs  129 

costs  by  including  further  factors  covering  selling  ex- 
penses, administrative  expenses,  and  a  percentage  for 
profit.  Some  manufacturing  establishments  prefer  to  add 
a  slight  factor  of  safety  over  and  above  manufacturing 
expense  so  as  to  allow  for  fluctuations  in  cost,  billing  the 
goods  to  the  sales  department  at  a  slightly  higher  price 
than  the  total  manufacturing  cost.  In  order  to  allow 
for  fluctuation  in  cost,  any  apparent  profits  made  by  the 
shop  can  be  transferred  to  reserves  for  meeting  deprecia- 
tion of  plant  and  equipment. 


TEST  QUESTIONS 

1.  What    are    the    principal    purposes    sensed    by    the    old- 
fashioned  or  traditional  cost  system? 

2.  What  are  the  reasons  for  inaccurate  costs? 

3.  Why  are  accurate  costs  essential  to  business  success? 

4.  How  may  the  cost  system  he  made  to  disclose  wastes? 

5.  In  what  different  waj^s  may  the  profits  of  an  industry  he 
increased  ? 

6.  In  a  business  making  assembled  product  what  is  the  argu- 
ment in  favor  of  collecting  costs  of  individual  parts? 

7.  In  what  way  may  the  cost  system  be  made  to  reveal  the 
economy  or  wastefulness  of  various  foremen? 

8.  What  are   predetermined   costs   and   what   purpose   may 
they  be  made  to  serve? 

9.  Under  what  conditions  is  the  process  method  of  determin- 
ing costs  preferable  to  the  product  order  or  business  cost  method? 

10.  Draw  a  chart  indicating  the  fundamental  cost  elements 
which  go  to  make  the  total  cost  of  any  kind  of  product. 

11.  Define  the  following:  (a)  material  burden,  (b)  direct 
labor,  (c)  expense  material,  (d)  indirect  labor,  (e)  supervisional 
salaries,  (f)  fixed  charges,  (g)  variable  plant  charges. 

12.  What  items  constitute  selling  expense? 


130  Organization  and  Management 

13.  What  are  the  chief  items  which  go  to  make  up  adminis- 
trative expenses? 

14.  What  is  the  argument  in  favor  of  merging  summarized 
cost  records  with  the  general  accounts  of  the  business? 

15.  Give  the  ordinary  debits  and  credits  to  material-burden 
account. 

16.  Give  the  ordinary  debits  and  credits  to  material  account. 

17.  Give  the  ordinary  debits  and  credits  to  pay-roll  account. 

18.  Give  the  ordinary  debits  and  credits  to  direct-labor  ac- 
count. 

19.  Give  the  ordinary  debits  and  credits  to  manufacturing- 
expense  account, 

20.  Give  the  ordinary  debits  and  credits  to  work-in-process 
account. 

21.  Give  the  ordinary  debits  and  credits  to  finished-product 
account. 

22.  Explain  the  difference  between  manufacturing  cost  and 
selling  cost. 


CHAPTEK  IX 
methods  of  coliiecting  material  and  labor  costs 

Sources  of  Cost  Data 

The  diagram  in  Figure  40  indicates  the  five  principal 
sources  of  cost  data.  These  data  relate  to  (1)  orders, 
(2)  materials,  (3)  material  burden,  (4)  direct  labor,  (5) 
manufacturing  expense. 

DATA  REGARDING   ORDERS 

The  cost  department  needs  to  have  for  its  own  files  an 
exact  copy  of  all  orders  issued  by  (a)  the  shipping  or 
order  department  as  a  result  of  instructions  from  the 
sales  department  authorizing  the  shipment  of  completed 
product  in  parts  in  stock,  or  the  making  to  order  of 
product,  or  the  repair  of  parts  or  completed  product; 
(b)  the  production  department,  whether  stock  orders 
for  detail  part  replenishment,  orders  for  assembling 
groups  or  entirely  erected  product,  or  special  repair  part 
or  repair  orders. 

It  frequently  happens  that  the  serial  numbering  scheme 
of  the  commercial  order  department  may  be  quite  dif- 
ferent from  that  employed  by  the  production  department, 
since  the  order  department's  system  will  be  adapted  to 
ease  of  reference  from  the  standpoint  of  selling  and 
commercial  records,  whereas,  the  production  depart- 
ment's numbering  system  will  be  adapted  to  ease  of  ref- 
erence and  natural  classification  of  product  in  the  shop.. 

131 


132 


Organization  and  Management 


r^ 


Croup   i 
Orders 


From  shipping  or  order 
department 


From  production 
department 


>■ 


Croup  II    > 
Materials  \ 


Croup  HI 
Material 
Burden 


From  bill  of  material 
department 

From  stores  manager 

From  receiving  depart- 
ment 

From  purchasing  agent 


From  accounting  depart-  ^ 
ment 


Data 
to  be 
Fur- 
nished/ 

to  / 
Cost  \ 

De-      \ 
part- 
men  t 


Croup  ivy 

Direct  / 
Labor    \ 


From  employment 
department 


From  time-keepcre 


r 


From  cashier 


Croup  V 
Manufac- 
turing 
Expense 


From  accounting  depart- 
ment ^ 


< 


From  cost  department's 
system    of    standing  < 


orders 


Copies  of  all  shipping  orders  and  con- 
tracts to  ship 

r 

Copies  of  all  shop  stock  orders  for  detail 

part  replenishment 
Orders  for  assembling  groups  or  entirely 

erected  product,  special  repair  part,  or 

repair  orders 
All  material  specifications 

All  withdrawal  orders  on  store-roona. 

Copies  of  all  lists  of  materials  received 

Copies  of  all  invoices  or  prompt  advices 
as  to  quantities  and  prices  of  all  goods 
purchased 

r 

Totals  of  inward  freight  and  hauling 
Totals  of  purchasing  department,  receiv- 
ing department,  and  stores  department 
salaries  and  wages  as  well  as  cost  of 
supplies,  traveling,  and  other  expenses 
in  these  departments 

Names  of  all  persons  employed,  together 
with  check  numbers,  rate  of  pay,  and 
exact  date  of  employment  of  each 

Names  of  all  persons  quitting,  together 
with  exact  date  of  quitting  and  check 
number 

Exact  time  put  in  on  each  productive  or 
expense  order  by  each  employe 

Distribution  of  each  man's  work  during 
every  pay  period,  such  distribution 
being  checked  against  pay-roll,  time, 
and  money  amount 

I     Copies  of  all  pay-roUs 

All  administrative  and  clerical  salaries. 
All  supervisional  shop  ssdaries 
All  fixed  charges,  such  as  interest,  de- 
preciation, taxes,  insurance,  etc. 

>- 

Expense  material,  such  as  waste,  machine 
oil,  etc. 

Indirect  labor  charged  to  standing  ex- 
pense orders 

Variable  plant  charges  covering  power, 
lighting,  heating,  plumbing,  repairs, 
maintenance,  etc. 


V 


Fig.  40, — Chart  Illnstrating  Sources  of  Cost  Data 


Collection  of  Costs 


133 


^ 


o  C 


o    o 

«   a 

^  &^ 

o  ^ 

la    « 
.S  o 

a  "o 
g-a 


134 


Organization  and  Management 


The  commercial  order  department  will  probably  clas- 
sify its  orders  into  series.  For  instance,  orders  desig- 
nated by  the  prefix  "C"  followed  by  the  number  would 


Amt. 


Model 


(g)l^ 


Article 


To  be  Finuihed 


Material  Wanted 


Material  Receive<1 


Inspector       Good 


1    1 

>V>VREHOLISB 

s.  o 

COUPON 

Article 

Material  Wnnled 

Amount 

Ft. 

Material                                            Sl;:e 

Dale  Delivered 

RETURN  TO  MATERIAI,  CLERK 


Warehouse  S.  K. 


FiQ.   42. — Front  of  Tag  Type  of   Production  Order 
For  reverse,  see  Fig.  43. 


Collection  of  Costs 


135 


be  contract  orders;  orders  designated  by  ''E"  followed 
by  a  number  would  be  repair  orders ;  orders  designated 
by  "D"  followed  by  a  number  would  be  detail  orders. 
Such  detail  orders  might  carry  sub-order  numbers  as- 
signed by  the  order  department;  for  example,  a  ''D" 


Te  Foremen  4, 


Time-Takers 


A  Tag  of  this  sorr^rrrtfTt  accompany  all 
Material  on  which  work  is  to  be  done. 
Foremen  must  not  assign  work  for  which 
there  is  no  Tag.  The  Tag  is  the  order  to 
the  man  to  do  the  work. 

If  you  wish  to  make  less  than  the 
amount  called  for,  an  additional  Tag  will 
follow  to  keep  track  of  this  item. 

Wt.  of  material  (other  than  C.  I.)   issued 

to  this  job—: -...lbs —  ozs. 

Sifraed  by 


(storekeeper) 


Mat'l  used.. 


Form  .302  4  3  06'5m 

Date  Tag  issued 

Date  cstgs.  to  mach.  shop. 
Date  rec'd  by  Assembler. 
Amt.  rec'd  by  Assembler. 

Balance  In  stock 

Counted  by 


STUB. 


rO  CLEANING   ROOM   FOREMAN  ANO 
STOCK-MOVER. 


This  Tag  with  stub  attached  is  to  be  kept 
on  file  by  Foreman  of  Cleaning  Room 
until  this  item  begins  to  come  through. 
When  castmgs  go  to  machine  shop,  fill  in 
"Date  Castings  to  Machine  Shop."  The 
Stock^Mover  is  responsible  for  delivering 
the  castings  with  Tag  safely  attached. 
He  is  to  tear  off  the  Stub  and  turn  it  in 
to  Production  Clerk. 

If  less  than  the  whole  number  of 
pieces  come  through,  be  sure  not  to  forget 
to  fill  in  the  No.  and  weight  of  the  first 
lot  on  both  Tag  and  Stub. 


Form  302-4  3-OS  Sm. 


Date  Tag  issued.. 


Date  castgs.  to  mach.  shop. 


Fig.  43.— Eeverpe  of  Tag  Type  of  Production  Order  Shown  in  Fig.  42 

order  number  might  be  followed  by  a  prefix  *'S"  followed 
by  a  sub-order  number  to  indicate  detail  parts  to  be 
shipped  from  stock,  or  the  detail  order  number  might  be 
followed  by  the  letter  ''P"  followed  by  a  sub-order  nmn- 
ber  to  indicate  that  a  production  order  had  been  issued 
by  the  shop  to  make  some  of  the  items  for  the  detail 
order. 


136  Organization  and  Management 

The  orders  written  by  the  order  department  are  usually 
manifolded  on  a  billing  machine.  The  different  series 
are  usually  written  on  different  shades  of  colored  paper. 
Figure  41  illustrates  a  type  of  order  as  issued  by  the 
commercial  order  department.  It  will  be  noticed  that 
orders  of  this  sort  contain  commercial  and  financial  in- 
formation which,  while  necessary  as  a  matter  of  record, 
is  not  essential  information  for  the  production  or  plan- 
ning departments. 

The  orders  written  by  the  production  or  planning  de- 
partments more  often  take  the  form  of  follower  tags  to 
accompany  the  work  in  process  through  the  shop.  Fig- 
ure 42  illustrates  the  front  and  Figure  43  the  reverse  of 
a  tag  of  this  sort.  Manifold  copies  of  the  tags  are  filed 
in  the  production-order  office. 

DATA  REGAKDING  MATERIALS 

In  order  that  the  cost  department  may  have  a  record 
of  the  total  charges  to  material  account,  it  is  necessary 
that  a  copy  of  the  receiving  department's  report  of  ma- 
terials received  be  sent  to  the  cost  department.  Figure 
44  illustrates  a  typical  receiving-department  report.  A 
different  type  of  report  of  materials  received  is  illus- 
trated in  the  chapter  on  stores.  In  order  that  the  mate- 
rials may  be  correctly  priced,  the  cost  department  should 
receive  either  the  original  invoice  from  the  purchasing 
agent  or  copies  of  the  same.  In  case  the  original  in- 
voices are  sent  to  the  cost  department,  the  routine  of 
handling  them  must  be  arranged  in  such  a  manner  that 
they  are  not  delayed  at  all. 

In  order  that  the  cost  department  may  credit  material 
account  with  the  proper  amount  for  all  materials  with- 
drawn from  store  room,  it  is  necessary  that  copies  of  aU 
material  specifications  be  sent  to  the  cost  department. 


Collection  of  Costs 


137 


It  is  also  necessary  that  all  withdrawal  orders  on  the 
store  room,  as  well  as  any  credit  slips  for  returned 
materials  (as  soon  as  they  are  entered  on  the  perpetual 
inventory  record  by  the  balance-of -stores  clerk),  be  sent 
to  the  cost  department. 

DATA    REGARDING    MATERIAL    BURDEN 

In  order  that  the  cost  department  may  establish  the 
material  burden  properly,  it  is  necessaiy  that  the  ac- 


PflJB    No. 

^ 

4ATERIAI 

.S  RECEIVED 

Report  No.- 

Consignor 

Date 
Shipped 

Purchase 
Order  No. 

Articles 

Quantity 

^ 

Fig.  44. — Eeceiving-Department  Report  of  Materials  Eeceived,  a  Manifold 
Copy  of  Which  Goes  to  Cost  Department 

counting  department  furnish  all  information  as  to 
inward  freight  and  hauling,  totals  of  purchasing  depart- 
ment, receiving  department,  and  stores  department  sala- 
ries and  wages,  as  well  as  cost  of  supplies,  traveling  and 
other  expenses  in  these  departments. 

DATA   REGARDING   DIRECT   LABOR 

In  order  that  the  cost  department  may  charge  to  work 
in  process  or  manufacturing  expense,  as  the  case  may 


138 


Organisation  and  Management 


Week 

pndirnr                —            

No. 

Ifame. 

DAY 

IN 

LOST    OR 

OVERTIME 

OUT 

OUT 

IN 

s 

A,  M. 

P.  M. 

M 

A.  M. 

P.   M. 

T 

A.   M. 

P.  M. 

W 

A.   M. 

P.  M, 

T 

A.   M. 

P.   M 

F 

A.   M. 

P.   M. 

S 

A.  M. 

P.   V. 

TolcHtime  _ 

.   .    -.    -.      ..Jm 

Hace  „ 

Tbtai  Vi 

ages  for  weei 

fc  s. 

Fig.  45. — Clock  Stamp  Time  Card  Registering  Arriving  and  Leaving  Time 

of  Employes 

The  totals  on  these  cards  must  check  with  the  totals  on  individual-job  cards 

shown  in  Pig.  46. 


Collection  of  Costs  139 

be,  the  correct  amount  of  labor  at  the  correct  rate,  it  is 
necessary  that  the  employment  department  furnish  the 
cost  department  the  names  of  all  persons  employed,  to- 
gether with  check  number,  rate  of  pay,  and  the  exact 
date  of  emplojTuent  of  each;  also  a  list  of  all  persons 
quitting,  together  with  the  exact  date  of  quitting  and  the 
check  number. 

From  the  time-keeping  department  the  cost  department 
will  receive  data  showing  the  exact  time  put  in  on  each 
productive  or  expense  order  by  each  employe.  Figures 
45  and  46  are  examples  of  time  cards.  Figure  45  is  used 
for  registering  only  the  arriving  and  leaving  time  of 
employes  and  is  used  primarily  for  pay-roll  purposes. 
Figure  46  is  a  job  time  card,  sometimes  called  a  ''work 
card, ' '  on  which  is  listed  the  time  charged  to  a  given  pro- 
ductive or  expense  order. 

Most  modern  systems  for  keeping  record  of  time  spent 
on  various  jobs  provide  a  separate  slip  for  each  job. 
^Vhen  this  arrangement  is  used  the  separate  slips  can 
be  filed  either  back  of  guide  cards  or  in  envelopes,  thus 
doing  away  with  the  need  of  transferring  postings  from 
a  general  time  card  to  the  various  cost  records.  With  a 
well-ordered  planning  department  the  time  slips  or  work 
orders  are  written  out  in  advance,  everything  being  filled 
in  excepting  the  check  number  of  the  worker  and  the 
time  of  starting  and  finishing. 

It  is  important  that  the  money  value  of  time  postings 
against  various  productive  and  manufacturing  expense 
orders  in  a  good  pay  period  foot  up  to  exactly  the  same 
amount  in  dollars  and  cents  as  the  total  pay-roll  for 
that  period.  In  connection  with  this  checking  it  is  quite 
customary  to  prepare  for  each  shop  department  a  so- 
called  ''distribution-of -labor  sheet"  for  every  pay  period. 
On  this  distribution-of-labor  sheet  appears  the  time  of 


140 


Organization  and  Management 


IN 


OUT  Klrfapecd   T 


ime 


Oper.  No. 


Oper.  Name 


Article 


F.  O.  No. 


Draw,  No. 


D.  W.  Rate 


Machine  No. 


P.  W.  Pnce 


Amt,  Finished 


Prem.  All'ce 


Amt  Del,  Previous 


Amt.  to  Pay 


Total  Finished 


Emp.  No. 


Emp.  Name 


Job  Card  No. 


Fig.  46. — Clock  Stamp  Job  Card  Rogistering  the  Time  Charged  to  a  Given 

Production  or  Expense  Order 

The   totals   on   these   cards   in   a   jriven    pay-period    must   check    with   totals   on 
payroll  cards  shown  in  Fig.  45. 


Collection  of  Costs  141 

each  employe  in  the  department,  together  with  a  clas- 
sification of  the  time  as  well  as  the  money  which  will  be 
paid  to  him. 

The  total  postings  of  labor  expressed  in  money  value 
on  cost  records  in  a  given  pay  period  must  be  the  same 
as  the  total  of  the  pay-roll  distribution.  In  order  to 
effect  this  balance,  the  entries  covering  the  cost  of  frac- 
tional hours  ^\ill  have  to  be  increased  or  decreased  by  a 
cent  or  two  here  and  there.  The  only  way  to  make  such 
an  adjustment  is  to  have  the  distribution  of  labor  specify 
the  order  numbers  in  the  cost  department  against  which 
each  man's  time  has  been  charged.  These  postings  are 
listed  on  the  adding  machine,  and  if  they  total  more  or 
less  than  the  man's  joay  envelope  money,  adjustment 
entries  are  made  until  the  amounts  agree.  The  cashier 's 
department  should  furnish  the  cost  department  with 
copies  of  all  pay-rolls  in  order  that  this  checking  may 
be  done. 

DATA    REGARDING    MANUFACTURING    EXPENSE 

In  order  that  the  cost  department  may  establish  a  cor- 
rect expense  burden,  the  accounting  department  should 
furnish  complete  data  in  regard  to  all  administrative  and 
clerical  salaries,  all  supervisional  shop  salaries,  all  fixed 
charges,  such  as  interest,  depreciation,  taxes,  insurance, 
and  all  special  manufacturing  expenses,  such  as  legal 
and  patent  expenses.  The  cost  department  must  secure, 
through  its  own  system  of  standing  orders  covering  shop 
expenses,  the  money  value  during  a  given  fiscal  period 
for  expense  material,  such  as  waste,  machine  oil,  etc., 
indirect  labor  charged  to  standing  shop  expense  orders, 
all  variable  plant  charges  covering  such  items  as  power, 
lighting,  heating,  plumbing,  repairs,  maintenance,  etc. 
The  next  chapter  will  outline  the  various  methods  em- 


142 


Organization  and  Management 


ployed   in    determining    and    distributing    the    expense 
burden. 

Assembling  the  Cost  Data 

Figure  47  illustrates  a  stiff  manila  envelope  arranged 
for  filing  in  a  standard  card-index  drawer,  the  envelope 
being  designed  to  hold  material  withdrawal  slips  and 


roSM  C.  6.  1      ig  JUNt  •«  IM 

Billed  s>/i\)i 

(o^^b^'^teU)               COST  SUMMARY 

ARTICLE  PoSTeK?T?^n^ 

For  foi<.-KJfY>p  TV\eaKr9.  ({^r.  U o^) 

Order  No  - 
Their  Req. 

}0IU 

\ 

No 

MONTH     

DIRECT  LABOR 
MACHINE  Time 
MFG.  EXPENSE 
RAW  MATERIAL 
MATERIAL  BURDEN 

JLnej^tH- 

TOTAL 

^1 

\ 

n  10 

Tl 

•tE 

$ 

' 

TH 

*c. 

» 

» 

A 

H 

50 

tb 

— 

/ 

3c 

TOTAL  COST  PRICE 

2.5.3I0 

1 

Fig.  47. — Stiff  Manila  Envelope  to  Contain  Material  Slips  and  Job  Time 
Cards  Arranged  lor  Monthly  Balance  Sheet 


Collection  of  Costs 


143 


time  slips  for  shop  orders.  The  printing  and  columns  on 
the  face  of  the  envelope  are  designed  to  facilitate  the 
monthly  closing  of  accounts  as  well  as  to  serve  the  pur- 
pose of  condensed  cost  analysis.  These  envelopes  may 
vary  in  capacity  from  an  ordinary  flat  envelope  designed 


DETAIL  COST  CARD 

S.O.                                                                                       [1      Qiiantitv 

!    Guide 

1         No. 

Date 

Operation 

Wkm. 

1[       ■      - 
Hrs.         1  Rate 

Labor 

No.           Pnn 
Fin          Time 

Name 

Size 

Class 

1 

1 

-\ —^ 

■^^ 

J                ' 

^ 

~ 

' 

p— 

\ • > 

>__ — 

T ■ 1 

1 \. 

h— 1 

Total  Labor. 

Mfg.  Ex. 

Mstettal. 

Total, 

1 

Fig.  48. — Typical  Traditional  Cost  Posting  Card  Necessitating  Transfer  of 

Time  Postings  from  Job  Slips  by  Clerks 

This  type  is  being  largely   superseded  by   the   type  showm   in   Fig.  47. 


to  hold  a  dozen  or  more  papers,  to  the  accordion-plaited 
type  of  envelope  designed  to  hold  bunches  of  slips,  run- 
ning from  1  to  10  inches  in  thickness. 

The  envelope  type  of  filing  time  and  material  records 
is  gaining  in  favor,  because  it  eliminates  a  large  amount 


144 


Organization  and  Management 


(Xt 

c 

'^. 

(0 

u 

H 

/ 

^ 

C    M 

\ 

•:=  C 

1 

aj.5 

\ 

a. 

■w 

u    60 

CO        1 

\ 

O        1 

&0 

1 

H        i 

■w    C 

O       , 

I.e 

( 

AND 

<^ 

is 

05 

<n 

< 

2 

1 

Z        1 

<u 

I 

>        ' 

Lju 

\ 

Q        I 

1 

\ 

u 

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H     ; 

<Ai 

s 

^     I 

o  <■> 

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iS     ' 

O       "■> 

[VE  T 
Voltag 

CQ 

, 

H 

(0 

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S    , 

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<       1 

>- 

\ 

S         1 

1 

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8    i 
1 

1 

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*j 

) 

o  ■- 

b 

2^ 

/ 

c 

\ 

a 

1 

6 

] 

^ 


Collection  of  Costs  145 

of  copying  and  posting.  The  traditional  method  is  to 
post  all  labor  costs  from  time  cards  or  job  slips  to  larger 
slips  arranged  by  order  numbers,  a  separate  sheet  or  card 
being  used  for  each  separate  piece  on  a  given  shop  order. 
Figure  48  illustrates  a  typical  labor  cost  card  of  this 
sort. 

CoMPAEATmE  Costs 

Comparative  costs  are  of  three  kinds :  (1)  Comparative 
total  costs  of  completely  assembled  product;  (2)  com- 
parative total  costs  of  individual  parts;  (3)  comparative 
operation  costs. 

In  order  to  prepare  a  record  of  comparative  total  costs 
of  assembled  product  it  is  necessary  only  to  prepare  a 
card  index  or  loose-leaf  binder  in  which  are  recorded  the 
chief  groups  which  constitute  a  total  cost.  Figure  49 
illustrates  a  form  for  recording  comparative  total  cost 
of  dynamos  and  motors.  A  study  of  these  comparative 
total  costs  is  necessary  when  the  management  contem- 
plates placing  new  designs  on  the  market  and  is 
comparing  probable  cost  factors  in  connection  with  the 
new  line  with  those  recorded  for  the  existing  styles.  The 
comparative  total  costs  are  also  valuable  for  the  works 
manager  in  noting  any  fluctuations  in  the  leading  factors 
and  in  demonstrating  to  him  the  benefits  accomplished 
by  improved  methods. 

Figure  50  illustrates  a  comparative  total-cost  record 
of  individual  parts.  This  comparative  cost  record  serves 
as  a  basis  for  preparing  price-lists  of  repair  parts  and 
also  in  noting  the  results  of  improved  shop  methods  as 
affecting  costs. 

Figure  51  is  a  comparative  operation-cost  record.  The 
entries  on  this  record  show  the  relative  cost  of  the  leading 
operations  performed  by  various  workmen  or  groups  of 


146 


Organization  and  Management 


workmen,  and  serve  as  an  aid  in  determining  the  stand- 
ing of  employes,  as  well  as  in  the  establishment  of  bonus 
or  premium  incentives,  either  for  the  operations  in  ques- 
tion or  for  new  similar  operations. 


COMPARATIVE  PIECE  COST  RECORD                                \ 
Drawing                               Part  No.    \ 

•Order  No. 

Oute 

Quantity 

Labor 

Material 

Exper^se 

Cost  Ea. 

Average  Cost 

i 

\ 

\ 

\ 

1 

:^==^ 

r — , 

- 

L-A      . 

- 

rH 

P^=^ 

\ 

\ 

\- 

y 

I 

\ 

^  r'                     \ 

Fig.   50. — Comparative  Individual-Part   Cost  Eecord 


COMPARATIVE  OPERATION  COST  RECORD   ^5  ^^-/^^ 

Type  of  Machine 

R.D.3  H.P.    1350  rflv.   500  volt.     -Sheet  INo.  1| 

Part 

Annature 

Winding  ner  Winding   Spec.   #562 

Other  D^fa    36   Slots  73  coils   12    turns  ^a--   -"^19   d.n.o.. 

Order 

No. 

OPERATION  COSTS 

First       Winding 

Second      Oonnooting 

Man's 

Time 

Flat 

Bonus 

Total 

Man's 

Time 

Flat 

Bonus 

Total 

No. 

Taken 

Cost 

Cost 

Np. 

Taken 

Cost 

Cost 

15S31 

69 

9 

2.70 

15 

2.85 

85 

1/2 

15 

08 

23 

15532 

69 

7 

2.10 

45 

2.55 

65 

3/4 

25 

04 

27 

15533 

73 

9 

^.70 

15 

2.85 

67 

1-1/4 

38 

00 

38 

15534 

73 

8 

2.40 

30 

2.70 

67 

1 

30 

00 

30 

Fig.  51. — Comparative  Operative  Cost  Record 

The  comparative  operation  cost  record  cannot  in  any 
way  take  the  place  of  a  scientific  time  and  motion  study. 
The  latter  must  always  be  the  basis  of  the  time  feature 


Collection  of  Costs  147 

in  connection  with  the  accomplishment  of  shop  opera- 
tions. Our  comparative  operation  cost  record,  however, 
introduces  a  new  feature  not  disclosed  by  the  time  and 
motion  studies,  namely,  the  rate  of  pay  and  total  amount 
of  bonus,  which  vary  with  different  employes. 

Peeiodic  Reports  by  the  Cost  Depaetment 

The  calendar  month,  as  a  rule,  does  not  constitute  so 
well-balanced  a  fiscal  period  as  one  of  four  wrecks,  since 
the  calendar  month  would  sometimes  include  four  pay- 
rolls and  sometimes  five.  In  order  to  assist  in  adapting 
the  fiscal  periods  to  pay-roll  periods,  it  is  customary  in 
a  good  many  lines  of  business,  which  have  undertaken  the 
preparation  of  fiscal  reports  every  four  weeks,  to  change 
all  salaries  from  a  monthly  to  a  weekly  basis.  The 
reports  for  each  fiscal  period  should  cover: 

1.  Value  of  material  received  at  the  close  of  period. 

2.  Value  of  material  received  during  this  period. 

3.  Value  of  work  in  process  in  shop  at  the  end  of 
period. 

4.  Total  of  all  charges  to  work  in  process  during  this 
period. 

5.  Value  of  finished  stock  on  hand  at  the  close  of 
period. 

6.  Total  of  all  stock  finished  during  this  period. 

7.  Value  of  direct  labor  during  this  period. 

8.  Value  of  indirect  labor  during  this  period. 

9.  Value  of  all  manufacturing  expenses  during  this 
period. 

The  foregoing  reports  should  be  listed  on  sheets  in  such 
a  way  that  the  figures  can  be  easily  compared  Avith 
figures  covering  the  same  items  during  previous  fiscal 
periods  and  for  the  corresponding  fiscal  period  in 
previous  years. 


148  Organization  and  Management 

Supplementary  Repokts 

The  principal  supplementary  report  of  the  cost  depart- 
ment will  be  that  in  which  the  subdivisions  of  the 
manufacturing  expense  account  are  classified.  This  is 
explained  in  detail  in  the  next  chapter. 

Another  t}^e  of  supplementary  reports  delegated  to 
the  cost  department  includes  efficiency  records.  These 
efficiency  records  consist  of  (a)  the  records  of  individual 
Avorkmen  showing  each  man's  percentage  of  efficiency  as 
compared  with  an  established  standard  for  each  job  on 
which  he  has  worked  during  a  given  period;  (b) 
departmental  efficiency  records  in  which  output,  number 
of  employes,  pay-rolls,  and  costs  are  compared  by  depart- 
ments; (c)  estimated  value  of  outstanding  purchase 
requisitions  for  material  during  this  period. 

In  some  organizations  the  efficiency  reports  are  made 
up  in  a  labor  bureau,  and  the  value  of  outstanding 
material  requisitions  are  turned  in  by  tlie  purchasing 
department  instead  of  the  cost  department. 

TEST  QUESTIONS 

1.  What  are  the  five  principal  sources  of  cost  data? 

2.  What  data  relating  to  orders  does  the  cost  department 
need  to  have? 

3.  What  sort  of  data  regarding  materials  does  the  cost  de- 
partment need  to  have? 

4.  What  data  in  regard  to  material  burden  does  the  cost  de- 
partment need  to  have  ? 

5.  How   are   data   in   regard   to   direct  labor   collected   and 
posted  ? 

6.  How  may  the  labor  postings  on  cost  records  be  checked 
against  pay-rolls? 


Collection  of  Costs  149 

7.  Describe  the  standing  order  system  of  securing  informa- 
tion in  regard  to  manufacturing  expenses. 

8.  From  what  sources  other  than  standing  order  system  are 
data  relating  to  manufacturing  expense  gathered? 

9.  What  methods  are  used  for  assembling  the  material,  labor, 
and  expense  data  relating  to  a  given  order  or  process? 

10.  What  are  the  three  classes  of  comparative  costs? 

11.  What  method  is  used  for  tabulating  each  of  the  above? 

12.  What  sort  of  summarized  reports  relative  to  material 
should  the  cost  department  make  ? 

13.  What  summarized  information  should  the  cost  department 
report  as  regards  work  in  process? 

14.  What  sort  of  summarized  reports  relative  to  finished  parts 
or  finished  stock  should  be  made  ? 

15.  What  sort  of  summarized  reports  relative  to  labor  should 
the  cost  department  prepare  ? 

16.  What  sort  of  reports  relative  to  expenses  should  the  cost 
department  make? 

17.  What  sort  of  individual  efficiency  records  can  be  prepared 
by  the  cost  department? 

18.  What  sort  of  departmental  records  can  be  prepared  by 
the  cost  department? 

19.  Draw  a  chart  showing  the  principal  departments  from 
which  the  cost  department  obtains  data,  indicating  very  briefly 
the  kind  of  data  obtained. 

20.  What  kind  of  work  in  the  cost  department  requires  ability 
as  a  detailist,  and  what  kind  of  work  demands  ability  to  general- 
ize? 


CHAPTEE  X 
the  distribution  of  the  expense  burden 

The  General  Divisions  of  Expense 

There  are  three  general  groups  of  expenses,  namely, 
(1)  administrative  expenses;  (2)  manufacturing  ex- 
penses; (3)  selling  expenses.  We  should  remember  that 
administrative  expenses  are  a  general  charge  upon  the 
business  as  a  whole,  while  manufacturing  expenses  and 
selling  expenses  are  peculiar  to  the  two  activities  of  pro- 
ducing and  selling.  Furthermore,  it  is  desirable  to  dis- 
tinguish clearly  between  manufacturing  costs  and  selling- 
costs  in  order  that  changes  either  in  manufacturing  or 
in  selling  conditions  may  be  properly  registered.  The 
production  division  should  not  be  held  accountable  for 
unusual  selling  expenses,  and  vice  versa.  This  treatise 
is  not  concerned  with  the  detailed  operations  of  selling 
expense. 

administrative  expenses 

Administrative  expenses  include  organization  expenses, 
such  as  promoter 's  and  legal  fees.  The  legal  fees  in  this 
group  will  exclude  such  as  are  connected  with  patents 
and  compensation  matters,  which  are  manifestly  manu- 
facturing expenses. 

Administrative  expenses  will  include  also  the  pay 
and  expenses  of  directors,  salaries  of  ofl&cers,  general 
accountants,    clerks    in    general    office,    depreciation    of 

150 


Distribution  of  Costs  151 

general  office  equipment,  expenses  in  the  way  of  sta- 
tionery, postage,  and  supplies  in  general  office,  and  wages 
of  janitors  and  other  laborers  doing  work  in  connection 
with  the  general  office. 

In  order  to  show  administrative  expenses  as  a  cost  fac- 
tor, they  are  usually  proportioned  to  manufacturing  and 
selling  costs.  For  example,  suppose  the  total  manufac- 
turing expenses  to  be  $1,000,000,  the  selling  expenses 
$100,000  and  the  administrative  expenses  $100,000,  and 
that  the  manufacturing  cost  of  one  article  is  $100.  Since 
the  administrative  expenses  are  10  per  cent  of  the  total 
manufacturing  cost,  we  add  10  per  cent  of  $100  to  get  the 
administrative  cost  to  be  added  to  this  particular  article, 
and  since  the  selling  expenses  are  also  10  per  cent  of  the 
total  manufacturing  cost,  we  add  another  10  per  cent  on 
$100  to  get  the  selling  expenses  on  this  one  article.  Thus, 
the  total  cost  of  the  article  would  be  $120. 

It  is  customary  and  rational  to  allot  administrative 
expenses  in  this  manner  as  a  percentage  on  the  money 
value  of  product.  It  is  worth  mentioning,  however,  that 
other  methods  have  been  proposed.  For  example,  in 
establishments  where  all  other  expenses  are  allotted  to 
the  unit  of  product,  as  per  ton  of  output,  administrative 
expense  can  be  easily  allotted  on  the  same  basis.  In 
public-school  systems  and  in  colleges,  an  allotment  on 
the  basis  of  expense  per  school-child  or  per  student-hour 
may  be  made.  In  railroads  the  allotment  can  be  made  on 
a  basis  of  the  ton-mile  or  the  passenger-mile. 

MANUFACTURING  EXPENSES 

Having  segregated  the  material  cost  and  direct  labor 
cost  from  the  manufacturing  cost  totals,  there  remain 
various  methods  of  allotting,  distributing,  or  distributing 
the  manufacturing  expense  burden  or  overhead.  This 
allotment  is  made  in  one  of  the  four  following  manners : 
(1)  allotment  by  product;  (2)  allotment  by  labor;  (3) 
allotment  by  machines ;  (4)  combinations  of  the  preceding 
three  methods. 


152  Organization  and  Management 

AULOTMENT   BY   PRODUCT 

The  simplest  method  of  allotment  by  product  is  by- 
bulk  in  a  continuous  process  analytical  manufacturing 
establishment,  as  in  the  case  of  the  making  of  mineral 
or  vegetable  oils.  A  single  rate  will  suffice,  if  the  product 
and  process  are  fairly  uniform.  However,  as  soon  as  we 
have  different  classes  of  product  with  different  processes, 
it  becomes  necessary  to  divide  the  manufacturing  ex- 
penses into  two  general  groups,  the  first  one  including 
expenses  common  to  all  product  and  to  all  processes,  and 
the  second  including  expenses  peculiar  to  certain  classes 
of  product,  thus  making  two  rates,  a  general  rate  per 
gallon  or  barrel  for  all  oils  in  the  case  of  oils,  and  a  class 
rate  per  gallon  or  barrel  to  be  added  to  each  class,  distinct 
from  the  general  rate. 

Instead  of  the  allotment  by  bulk  we  usually  have  an 
allotment  by  weight,  as  in  foundries  and  rolling-mills. 
Here  again  we  shall  have  different  classes  of  castings. 
All  of  the  castings  must  bear  a  certain  assessment  per 
pound  for  the  expenses  common  to  all  castings.  On  the 
other  hand,  there  will  be  a  class  rate  per  pound  to  cover 
such  expenses  as  are  peculiar  to  each  class  of  castings 
and  not  general. 

Another  method  of  allotting  expenses  by  product  is  to 
assess  the  expense  as  a  percentage  on  the  cost  of  material. 
Where  the  material  is  uniform  this  method  answers  prac- 
tically the  same  purposes  as  an  allotment  per  unit  of 
finished  product.  Wliere  the  material  varies  in  cost, 
however,  this  method  cannot  be  applied.  For  instance, 
it  is  manifestly  erroneous  to  charge  an  article  made  out 
of  brass  with  seven  or  eight  times  the  burden  charged 
on  an  article  made  out  of  iron  in  the  same  plant,  simply 
because  the  raw  material  in  the  brass  article  costs  seven 


Distribution  of  Costs  153 

or  eight  times  what  the  raw  material  in  the  iron  article 
does. 

AlJ^OTMENT    BY    LaBOR 

Probably  the  most  widely  used  method  of  assessing 
the  manufacturing  expense  is  by  allotting  it  in  accordance 
with  the  direct  labor  factor  in  production.  There  are 
two  methods  of  allotting  by  direct  labor:  (1)  the  per- 
centage on  direct  labor  method;  (2)  the  hourly  manu- 
facturing expense  rate,  in  accordance  with  which  for 
every  hour  of  direct  labor  charge  there  is  an  hour  of 
manufacturing-expense  charge. 

THE  PERCENTAGE-ON-DIRECT-LABOK   METHOD 

In  this  method  ^ve  keep  accurate  record  of  the  flat  cost 
of  all  wages  charged  directly  against  production,  such 
charges  including  only  labor  going  directly  and  physically 
into  specifically  recognizable  production  goods.  All  other 
labor  finds  its  way  through  various  subsidiary  accounts 
ultimately  into  the  manufacturing  expense  account. 

At  the  close  of  a  fiscal  period  or  at  the  close  of  a 
predetermined  series  of  fiscal  periods,  the  money  total 
of  the  direct-labor  costs  for  the  time  in  question  is  com- 
pared with  the  money  total  of  the  general  manufacturing 
expenses  of  all  sorts,  including  all  indirect  and  non- 
productive labor  charges.  Taking  the  total  direct-labor 
costs  as  representing  100  per  cent,  we  determine  what 
percentage  of  this  amount  is  represented  by  the  money 
total  of  the  manufacturing  expenses.  For  instance,  if 
the  direct  labor  costs  in  the  period  were  $100,000  and  the 
manufacturing  expenses  during  the  same  period  were 
$150,000,  then  we  call  the  direct  labor  costs  100  per  cent 
and  we  find  that  the  manufacturing  expenses  were  150 
per  cent.    We  therefore  decide  to  assess  150  per  cent  of 


154  Organisation  and  Management 

the  direct  labor  cost  of  every  piece  or  assembled  group 
or  completed  product  to  the  coml^ined  cost  of  labor  and 
material  so  as  to  arrive  at  the  total  manufacturing  cost. 

For  example,  our  cost  records  might  show  that  a  spur 
gear  costs  us  20  hours  of  direct  labor  at  30  cents  an  hour, 
making  a  total  direct-labor  cost  of  $6.00.  Our  manu- 
facturing expense  burden  would  be  150  per  cent  of  $6,00, 
or  $9.00,  making  the  combined  cost  of  direct  labor  and 
manufacturing  expense  $15.00.  If  the  material  cost  $1.00, 
we  should  add  it  at  cost,  provided  our  manufacturing- 
expense  account  included  material-burden  charges.  The 
total  manufacturing  cost  of  our  spur  gear  would  then  be : 

Material $1.00 

Direct  Labor 6.00 

Manufacturing    Expense 9.00 

Total $16.00 

In  case  material  burden  was  kept  separate  and  not 
included  in  the  general  manufacturing  expense  account, 
and  not  added  to  material  prices  when  material  was 
credited  to  stores  and  charged  to  work  in  process,  we 
shall  have  to  add  a  percentage  on  material  cost  to  cover 
material  burden.  This  percentage  may  be  from  10  to 
30  per  cent  of  the  invoice  costs  of  material. 

The  percentage-on-direct-labor  method  is  today  the 
most  usual  one  of  assessing  the  manufacturing  expense 
burden.  The  argument  in  its  favor  is  that  it  is  the 
simplest  of  all  systems  to  apply  and  the  easiest  one  to 
figure.  Opposed  to  this  argument  are  certain  manifest 
defects.  If  the  rate  of  pay  for  the  same  kind  of  work 
varies,  we  are  not  only  paying  a  higher-priced  man  more 
money  for  doing  the  work,  but  w^e  are  assessing  a  higher 
share  of  the  manufacturing-expense  burden  to  the  job 
he  did  than  if  a  lower-priced  man  did  the  work.    If  the 


Distribution  of  Costs  155 

lower-priced  man  took  twice  as  long  to  do  the  work, 
then  the  job  had  the  benefit  of  the  floor  space,  the  power, 
light,  heat,  mechanical  transportation,  supervision,  and 
indirect  labor  factors  of  the  shop  for  twice  as  long  a 
period  as  the  same  job  did  when  done  by  the  higher-paid 
man. 

Our  percentage-on-direct-labor  method  takes  no  notice 
of  the  time  element  in  direct-labor  costs.  Where  the 
product  is  fairly  uniform  and  the  same  rate  of  pay 
prevails  for  the  same  class  of  labor  and  the  time  in 
which  each  job  is  done  does  not  fluctuate  much,  this 
defect  may  be  overlooked.  However,  such  conditions 
rarely  exist.  Hence,  the  tendency  among  progressive 
manufacturers  is  to  abandon  the  percentage-on-direct- 
labor  method  and  substitute  for  it  the  hourly  manufac- 
turing expense  rate. 

THE    HOURLY    EXPENSE    RATE 

In  this  method  we  keep  an  accurate  record  not  only 
of  the  total  flat  cost  of  all  wages  charged  directly  against 
production,  but  also  of  the  total  time  of  all  this  direct 
labor.  As  in  the  percentage-on-direct-labor  method,  all 
other  labor  finds  its  way  ultimately  into  the  manufactur- 
ing-expense account.  At  the  close  of  a  fiscal  period  or  a 
series  of  fiscal  periods,  the  total  hours  spent  in  direct 
labor  during  the  time  in  question  is  calculated.  The 
manufacturing  expense  for  the  same  time  is  divided  by 
the  total  hours  of  direct  labor.  The  quotient  gives  an 
hourly  expense  rate  for  every  hour  of  direct  labor. 

In  favor  of  this  plan  it  is  argued  that  rent,  taxes, 
depreciation,  and  all  other  fixed  as  well  as  variable  plant 
charges  vary  directly  with  the  time  element.  Under  this 
system  a  job  which  consumes  ten  hours  of  direct  labor 
in  the  shop  is  charged  with  t\vice   the  manufacturing 


156  Organization  and  Management 

expense  of  a  job  which  consumes  five  hours  of  direct 
labor  in  the  shop.  If,  for  example,  the  direct  labor  costs 
in  a  period  are  $100,000  and  represented  400,000  hours, 
and  the  manufacturing  expenses  during  the  same  period 
were  $150,000,  we  divide  the  $150,000  by  400,000,  giving 
us  37 1/2  cents  an  hour  as  the  hourly  manufacturing  ex- 
pense rate.  Taking  now  the  spur  gear  which  cost  us  20 
hours  of  direct  labor  at  30  cents  an  hour,  making  a  total 
direct  labor  cost  of  $6.00,  we  should  add  20  hours  of 
manufacturing  expense  at  371/2  cents  an  hour,  making 
$7.50  as  the  expense  burden.  If,  however,  the  direct  labor 
cost  of  $6.00  had  represented  30  hours  at  20  cents  an 
hour,  we  should  add  30  hours  of  manufacturing  expense 
at  371/2  cents  an  hour,  making  $11.25  as  the  expense  bur- 
den. Under  the  percentage-on-direct-labor  system,  the 
expense  burden  would  have  been  the  same  in  each  in- 
stance. 

A^Hien  we  compare  the  widely  differing  results  under 
the  two  different  systems,  we  begin  to  realize  that,  while 
accounting  accuracy  is  absolutely  essential,  it  is  not 
accuracy  in  postings  alone  that  will  result  in  true  costs. 
The  National  Machine  Tool  Builders'  Association  has 
adopted  the  hourly  expense  rate  for  the  sake  of  uni- 
formity, as  well  as  for  its  apparently  greater  accuracy 
in  manufacturing  lines  of  the  synthetic  or  assembling 
type. 

LocAX.  AND  General  Burden  Bates 

No  matter  which  of  the  former  methods  is  used,  there 
is  one  argument  which  will  have  to  be  met,  namely:  If 
we  manufacture  a  wider  line  than  our  competitors,  have 
we  allotted  our  expense  burden  so  as  to  charge  it  against 
the  various  departments  faii^ly?  If  we  manufacture  two 
lines,    one    requiring   only   light   machinery   and   much 


Distribution  of  Costs  157 

bench  work,  and  the  other,  heaA^^  machinery  and  little 
bench  work,  is  it  fair  to  charge  the  first  line  with  the 
same  manufacturing  expense  burden  rate  as  we  charge 
to  the  second?  Does  this  procedure  not  make  the  first 
line  apparently  cost  us  too  much  and  the  second  line 
cost  us  too  little?     If  so,  how  can  we  remedj^  the  defect? 

This  argument  has  been  met  by  segregating  all  manu- 
facturing expense  items  common  to  all  departments  from 
those  local  to  specific  departments,  establishing  first  a 
general  expense  rate  common  to  all  departments  and  next 
local  expense  rates  for  certain  departments  or  groups 
of  departments.  Such  a  division  would  relieve  all  bench 
and  vise  work  from  any  overhead  involving  operation 
of  machines,  and  would  separate  a  light  machine  shop 
from  a  heavy  machine  shop.  This  division  is  easily 
provided  for  on  the  hourly  basis  by  dividing  the  direct- 
labor  total  for  a  given  fiscal  period  into  its  group- 
constituents.  For  example,  suppose  wahad  the  following 
group-constituents : 

DlKECT- 

Direot-Labok  Costs  Laboe 

Hours 

Small -machine    shop $  50,000  200,000 

Heavy-machine    shop 25,000  100,000 

Vise  and  floor  work 25,000  100,000 

Total $100,000  400,000 

Manttfacturing-Expense  Distribtttion 

General  overhead    $  65,000 

Small-machine    shop 25,000 

Heavy-machine    shop 50,000 

Vise  and   floor  work 10,000 

Total    $150,000 

We  should  now  divide  our  general  overhead  of  $65,000 
by  the  400,000  of  total  direct  labor  hours,  obtaining  a 


158  Organization  and  Management 

general  overhead  burden  of  I614  cents  an  hour.  We 
should  divide  our  small  machine  shop  expense  of  $25,000 
by  200,000  of  total  direct  labor  hours  worked  in  the  small 
machine  shop,  giving  a  local  burden  rate  for  the  small 
machine  shop  of  12 1/^  cents  an  hour.  We  should  divide 
our  heavy  machine  shop  expense  of  $50,000  by  100,000  of 
total  direct  labor  hours  worked  in  the  heavy  machine 
shop,  giving  a  local  burden  rate  for  the  heavy  machine 
shop  of  50  cents  an  hour.  We  should  next  divide  our  $10,- 
000  of  vise  and  floor  expense  by  100,000  direct  labor  hours 
worked  in  vise  and  floor  departments,  giving  a  burden 
rate  of  10  cents  an  hour  as  the  local  burden  in  vise  and 
floor  departments.  The  following  would  now  be  the 
hourly  local  rates: 

In  small-machine  shop,  I2I/2  cents 
In  heavy-machine  shop,  50  cents 
In  vise  and  floor  shops,  10  cents 

In  addition  to  the  above,  there  is  a  general  overhead 
hourly  expense  of  I6I/4  cents  per  hour,  making  the  total 
burden  rate  to  be  charged  in  each  group : 

Small-machine  shop,  28%  cents 
Heavy-machine  shop,  6614  cents 
Vise  and  floor  shops,  26^4  cents 

It  is  quite  evident  that,  if  we  figure  our  costs  on  the 
above  basis,  we  may  cover  a  wide  line  of  work,  and  our 
costs  will  enable  us  to  figure  on  the  same  basis  as  the 
man  who  does  not  cover  so  wide  a  line.  Where  light 
and  heavy  product  is  built  in  the  same  shop,  the  above 
method  is  absolutely  indispensable,  especially  if  there 
is  any  competition  in  light  repair  parts  (and  possibly 
the  lighter  assembled  product)  with  local  job  shops  or 
smaller  competitors. 


Distribution  of  Costs  159 

AliiOTMENT  BY  MACHINES 

The  allotment  of  the  manufacturing  expense  to  various 
machines  is  a  practice  which  has  existed  in  a  rather 
unscientific  form  for  many  years  in  planing-mills  and 
in  job  machine  shops.  The  method  in  these  establish- 
ments is  what  has  been  designated  as  the  old  type  of 
machine  rate.  According  to  it  w^e  apportion  the  entire 
manufacturing  expense  to  machines  only.  For  example, 
assuming  that  we  have  a  total  manufacturing  expense  of 
$150,000,  we  should  get  an  approximation  of  the  total 
number  of  hours  that  all  of  the  machines  of  any  one  type 
and  class  were  running,  and  allot  to  each  of  these  groups 
of  machines  a  portion  of  the  manufacturing  expense  which 
the  machines  must  earn,  as  it  were,  by  being  paid  an 
hourly  rate  for  their  time.  This  old  type  of  machine 
rate  does  not  establish  local  or  general  burden  rates 
distinct  from  the  machine  rates,  but  makes  the  machine 
rate  carry  the  entire  manufacturing  expense  burden. 

The  more  modern  machine  rate  is  one  which  allots  a 
budget  to  each  machine  or  group  of  similar  machines, 
such  budget  covering  the  portion  of  manufacturing  ex- 
penses as  is  chargeable  only  to  different  machines  or 
group  of  machines.  This  will  naturally  leave  a  portion 
of  the  manufacturing  expense  not  chargeable  to  machines 
to  be  covered  by  additional  burden  rates.  The  additional 
burden  rate  may  be  (1)  a  general  overhead  rate  only; 
(2)  both  a  local  departmental  and  a  general  overhead 
rate.  The  last-named  method  is  unquestionably  the  more 
accurate  and  satisfactory  apportioning  of  the  manufac- 
turing expense. 

DETERMINING    THE    MACHINE    EATES 

The  first  step  toward  determining  the  machine  rates 
is  to  separate  from  the  manufacturing  expense  account 


160  Organization  and  Management 

total  such  portion  of  it  as  exists  by  reason  of  the  owner- 
ship and  operation  of  machinery.  This  portion  will 
include  a  share  of  the  charges  for  depreciation  of 
buildings,  taxes,  and  insurance  based  on  the  space  occu- 
pied by  machines,  all  of  the  charges  for  depreciation  of 
machinery,  such  portion  of  the  small  tools  account  as 
represents  tools  used  on  machines,  such  proportion  of 
power  charges  as  represents  power  needed  for  driving 
machines,  and  in  fact  everything  in  the  way  of  expenses 
incurred  by  reason  of  operating  the  machinery. 

Having  determined  what  total  portion  of  the  manu- 
facturing expense  must  be  borne  by  all  of  the  machines, 
the  next  problem  is  the  allotment  of  a  budget  to  each 
machine,  which  it  must  earn,  as  it  were,  by  charging  an 
hourly  rate  for  its  services.  To  determine  this  budget 
we  need  to  know  the  approximate  power-consumption 
of  each  machine,  the  rapidity  with  which  it  wears  out 
small  tools,  and  the  number  of  total  hours  in  a  given 
fiscal  period  that  each  machine  was  operated. 

Having  allotted  to  each  machine  the  budget  which  it 
must  earn,  we  divide  the  amount  of  this  budget  by  the 
hours  the  machine  was  operated  in  a  similar  fiscal  period, 
so  as  to  obtain  the  hourly  machine  rate.  We  now  write 
out  a  card  or  loose-leaf  binder  sheet  for  each  machine, 
and  as  we  charge  up  machine  rates  to  work  in  process, 
we  credit  the  machine  on  its  card  or  sheet  with  such 
earnings.  At  the  end  of  a  fiscal  period  we  balance  the 
earnings  against  the  budget.  If  the  earnings  have  fallen 
short,  we  may  have  to  increase  the  rate  for  the  next 
period.  If  they  have  been  in  excess  of  the  budget,  we 
may  be  able  to  decrease  the  rate  somewhat. 

The  local  and  general  burden  rates  exclusive  of  machine 
rates  are  determined  by  allotting  the  residue  of  the 
manufacturing  expense  account  after  we  have  taken  out 


Distribution  of  Costs  161 

the  amount  we  expect  the  machines  to  earn,  in  accordance 
with  the  methods  described  on  page  156. 

The  Standing  Expense  Oeders 

In  order  to  take  care  of  the  proper  collection  and  dis- 
tribution of  the  expense  burden,  it  is  desirable  to  assign 
a  capable  man  to  this  work  as  his  regular  duty.  If  the 
establishment  has  more  than  a  hundred  employes,  this 
w^ork  will  take  nearly  all  of  one  man's  time.  If  there 
are  two  hundred  employes,  it  will  unquestionably  take 
all  of  one  man's  time  in  an  assembling  type  of  industry. 
The  method  used  for  collecting  the  manufacturing,  sell- 
ing, and  administrative  expense  data  is  most  generally 
that  of  classifying  the  various  kinds  of  expenses  in  each 
group  and  assigning  a  number  or  symbol  to  each  kind. 
The  symbol  and  number  used  together  will  be  found  more 
advantageous  than  a  numerical  system,  since  the  symbol 
letter  followed  by  numbers  is  more  flexible  and  permits 
of  the  addition  of  new  standing  orders  without  disarrang- 
ing the  existing  list. 

Typical  Standing  Orders  in  the  Administrative- 
Expense  Group 

As  an  example  of  the  standing  orders  in  this  group  the 
following  may  be  cited : 

EAl — Promoter's  fees. 

EA2 — Legal  fees. 

EA3 — Pay  and  expenses  of  directors. 

EA4 — Salaries  of  general  officers  and  assistants. 

EA5 — Salaries  of  general  accountants,  assistants,  and  clerka. 

EA6 — Depreciation  of  general-office  equipment. 

EA7 — Salaries  of  general-office  stenographers. 

EA8 — General-office  stationery,  postage,  and  supplies. 

EA9 — Wages  of  janitors  and  gardeners. 

Etc. 


162  Organization  and  Management 

Typical,  Standing  Orders  in  the  Manufacturing- 
Expense  Group 

The  list  suggested  below  indicates  the  nature  of  the 
groups  under  manufacturing  expense,  which  will  classify 
expenses  making  up  the  general  overhead  burden: 

EMGl — Salaries    of    works    manager    and    assistant    works 

manager. 
EMG2 — Depreciation  of  works  office  equipment. 
EMG3 — Salaries   of   planuing-department   heads   and   assis- 
tants. 
EMG4: — Salaries  of  planning-department  clerks  and  stenog- 
raphers. 
EMG5 — Depreciation  of  planning-department  equipment. 
EMG6 — Planning-department  stationery,  postage,  and  sup- 
plies. 
EiMGPl — Power-house  labor. 
EMGP2 — Power-house  supplies. 

Coming  next  to  the  group  of  standing  orders  which 
would  be  utilized  to  make  up  local  departmental  burden 
rates,  we  might  have : 

EMLFl — Salaries  of  foremen  and  gang  bosses  in  foundry. 
EjMLF2 — Labor  in  connection  with  charging  cupola. 
EMLF3 — Labor  in  connection  with  pouring. 
EMLIMI — Salaries  of  foremen  and  gang  bosses  in  machine 

shop. 
E]\ILM2 — Labor  in  operating  cranes. 

Typical  Standing  Orders  in  the  Selling-Expense  Group 

In  this  group  we  might  have  standing  orders  as 
follows : 

ESI — Salaries  of  sales  manager  and  assistants. 
ES2 — Salaries  of  clerks  and  stenographers  in  sales  depart- 
ment. 


Distribution  of  Costs  163 

ESS — Salaries  of  salesmen. 

ES4 — Salaries  of  advertising  manager  and  assistants. 

ESS — Salaries  of  traveling  salesmen. 

ES6 — Traveling  expenses  of  salesmen. 

Co-operation  with  Accounting  Depaetment 

It  is  absolutely  essential  that  the  head  of  the  cost 
department  and  the  head  of  the  accounting  department 
have  a  perfect  understanding  in  regard  to  the  collection 
and  allotment  of  expense  data.  As  a  matter  of  permanent 
record,  it  is  frequently  desirable  to  designate  after  each 
standing  order  the  debits  or  credits  to  certain  book 
accounts  in  the  general  records.  For  instance,  we  might 
have  a  standing  order  worded  as  follows : 

EMLM17 — Machinist's  time  spent  in  oiling  and  cleaning  up 
machine  (credit  pay-roll;  debit  manufacturing 
expense). 

The  information  in  parentheses  is  a  record  of  the 
agreement  between  the  cost  department  and  the  account- 
ing department  as  to  the  disposal  of  the  item  in  question. 
Similar  annotations  in  parentheses  may  be  put  at  the  end 
of  the  description  of  each  standing  order. 


TEST  QUESTIONS 

1.  What  are  the  three  principal  divisions  of  expense? 

2.  In  what  manner  are  administrative  expenses  assessed? 

3.  In  what  sort  of  industries  is  it  fair  to  allot  manufacturing 
expense  by  bulk?    In  what  sort  by  weight? 

4.  Under  what  conditions  would  it  be  equitable  to  allot  manu- 
facturing expense  as  a  percentage  on  cost  of  material? 

5.  Describe  the  percentage  on  direct  labor  method  of  diffus- 
ing manufacturing  expense. 


164  Organization  and  Management 

6.  Compare  the  percentage-on-direct-labor  method  in  the  case 
of  a  man  working  20  hours  at  30  cents  with  the  case  of  a  man 
working  30  hours  at  20  cents. 

7.  Describe  the  hourly  expense  rate. 

8,  Illustrate  by  an  example  how  the  hourly  expense  rate 
would  operate  as  compared  with  the  percentage-on-direct-labor 
method. 

9,  What  is  the  argument  in  favor  of  having  a  variety  of  local 
burden  rates  and  an  additional  burden  rate  ? 

10.  Would  it  be  practicable  to  take  care  of  all  manufacturing 
expenses  by  means  of  machine  rates  without  having  any  other 
expense  rates?    Explain. 

11.  Describe  the  method  which  allots  a  budget  to  each  machine. 

12.  How  do  we  establish  a  machine  rate  which  shall  be  distinct 
from  local  and  general  departmental  rates? 

13.  How  may  we  determine  whether  the  machine  rates  assessed 
in  a  given  period  have  fallen  under  or  overrun  the  correct 
amount  ? 

14.  Give  a  typical  list  of  standing  orders  to  cover  administra- 
tive expense. 

15.  Give  a  typical  list  of  standing  orders  to  cover  manufactur- 
ing expense. 

16.  Give  a  typical  list  of  standing  orders  to  cover  selling  ex- 
penses. 

17.  In  what  way  can  a  cost  department  co-operate  with  the 
accounting  department  in  the  matter  of  standing  expense  orders  ? 

18.  What  is  the  argument  in  favor  of  competing  companies  in 
the  same  class  of  industry  adopting  a  uniform  cost  accounting 
system  ? 

19.  If  the  uniform  cost  accounting  system  adopted  involved  a 
single  hourly  expense  burden,  would  any  advantage  accrue  to  a 
manufacturer  of  the  association  operating  under  the  uniform 
system,  from  adopting  in  his  own  shop  a  system  which  used  ma- 
chine rates,  together  with  local  and  general  burden  rates  ? 

20.  Could  a  cost  system  be  applied  to  the  operation  of  public 
schools?  If  so,  what  would  be  the  unit  and  what  methods  of  com- 
parison might  be  adopted? 


CHAPTER  XI 
standardization 

Importance  of  Standards 

When  we  consider  how  many  standards  of  national 
and  international  significance  have  been  the  subject  of 
controversy  and  even  wars,  and  to  what  extent  civiliza- 
tion has  been  advanced  by  the  adoption  of  standards  and 
retarded  by  conflicts  regarding  standards  or  by  the  ad- 
herence to  false  standards,  we  begin  to  realize  how  im- 
portant the  subject  is.  Such  matters  as  the  calendar, 
methods  of  measuring  the  time  of  day,  language — spoken 
and  written,  weights  and  measures,  mathematical  and 
scientific  units  have  all  been  submitted  to  adjudication 
by  competent  authorities,  usually  after  lengthy  contro- 
versies. 

Considering  matters  of  immediate  industrial  impor- 
tance, we  have  commercial  standards  in  accounting 
methods,  engineering  standards  relating  to  such  things 
as  screw  threads,  pipe  flanges,  methods  of  conducting 
engine  and  boiler  tests,  and  many  similar  examples. 

Advantages  of  Standardization 

The  advantages  of  standardization  may  be  discussed 
from  the  standpoint  of  (1)  advantages  to  the  proprietor 
of  a  business;  (2)  advantages  to  the  employe;  (3)  ad- 
vantages to  the  consumer. 

165 


166  Organization  and  Management 

From  the  standpoint  of  advantages  to  the  employer 
or  proprietorship,  we  may  cite  the  following:  (a)  Less 
designing  is  required  and  the  expense  of  paying  design- 
ers is  reduced;  (b)  less  labor  is  required,  since  every- 
thing is  uniform  and  adeptnesg  and  speed  are  acquired 
by  the  workers;  (c)  a  less  extensive  line  of  materials, 
equipment,  and  tools  is  necessary. 

From  the  standpoint  of  advantage  to  the  worker,  we 
have  (a)  greater  comfort  due  to  full  equipment  of  all 
tools  and  devices  to  make  work  easier;  (b)  greater  stead- 
iness of  employment,  since  the  making  of  a  smaller  num- 
ber of  varieties  and  styles  will  always  tend  to  greater 
stability  of  business. 

From  the  standpoint  of  advantage  to  the  consumer  we 
have  (a)  lower  prices;  (b)  prompt  deliveries ;  (c)  a  mini- 
mum of  delays  in  waiting  for  repair  parts. 

Disadvantages  of  Standardization 

The  disadvantages  of  standardization  may  be  dis- 
cussed from  the  same  standpoint,  namely,  those  accruing 
to  (1)  the  proprietor;  (2)  the  employe;  (3)  the  con- 
sumer. 

From  the  standpoint  of  disadvantages  to  the  propri- 
etor we  may  list  the  following: 

1.  When  competition  forces  new  designs  on  the  mar- 
ket, the  specialized  machines  and  tools  adapted  to  old 
standard  designs  must  be  scrapped,  causing  a  large  loss. 
This  argument  is,  of  course,  a  negative  one  and  assumes 
that  standards  do  change. 

2.  When  processes,  tools,  and  manual  operations  be- 
come standardized,  competition  becomes  greater. 

From  the  standpoint  of  disadvantages  to  the  worker 
we  have,  first,  the  substitution  of  handicraft  specialists 
for  all-round  mechanics.    When  such  a  specialist  loses  his 


Standardization  167 

job  he  has  a  hard  time  finding  another.  Secondly,  since 
all-round  mechanical  ability  is  not  demanded,  the  handi- 
craft man  is  developed  from  the  ranks  of  laborers,  and 
wages  are  low. 

From  the  standpoint  of  disadvantages  to  the  con- 
sumer we  have,  first,  pronounced  delay  in  adopting  im- 
proved types,  particularly  in  those  industries  where 
centralized  control  prevails.  Hand  in  hand  with  this 
objection  is  the  charge  of  suppressing  patents  for  im- 
proved types  by  the  centralized  proprietorship  which 
can  purchase  the  patent  at  its  own  price,  since  it  consti- 
tutes the  only  sales  market  open  to  the  inventor.  Then 
we  have  the  difiiculty  of  changing  standards  which  have 
become  widely  used,  as,  for  example,  the  difficulty  in 
adopting  the  metric  system  of  weights  and  measures.  The 
above  statements  regarding  disadvantages  as  well  as  ad- 
vantages of  standardization  are  made  at  the  outset,  in 
order  that  the  proper  attitude  toward  the  subject  may  be 
had  at  the  very  beginning  of  this  discussion. 

The  Field  of  Standaedization 

The  applicability  of  standardization  in  industrial  activ- 
ities may  be  considered  with  respect  to  the  same  three 
groups  as  were  considered  in  connection  with  the  ques- 
tion of  general  expenses,  namely,  (1)  standardization  in 
the  administrative  division,  (2)  standardization  in  the 
production  division,  (3)  standardization  in  the  selling 
division. 

Standardization  in  the  Administeative  Division 

In  this  di\dsion  the  different  steps  towards  standard- 
ization consist  of  the  following: 

1.  The  preparation  of  the  general  organization  chart 
showing  each  department's  scope  and  limits  of  authoritj''. 


168  Organization  and  Management 

2.  The  preparation  of  a  departmental  organization  s«t 
of  charts  showing  the  authority  and  responsibilities  of 
each  individual  in  the  administrative  division. 

3.  The  preparation  of  detailed  instructions  as  to  the 
daily,  weekly,  and  monthly  routine  of  each  position. 

4.  The  collection  of  all  the  above  material  into  a  so- 
called  **book  of  standards,"  a  copy  of  which  is  supplied 
to  each  department  and  which  is  accessible  to  any  mem- 
ber of  that  department. 

5.  The  preparation  of  a  book  of  printed  forms.  In  this 
book  of  forms  all  of  the  forms  relating  to  a  given  division 
of  work  are  designated  by  a  mnemonic  s\Tnbol  followed 
by  a  number.  This  allows  indefinite  expansion  of  forms 
in  a  given  division.  When  they  are  pasted  on  large  stiff 
sheets  in  a  loose-leaf  binder  it  gives  the  assurance  that 
all  of  the  forms  relating  to  any  one  division  will  always 
be  found  together.  Opposite  each  form,  or  underneath 
it,  is  pasted  a  sheet  of  paper  on  which  are  typewritten 
instructions  as  to  the  use  of  the  form.  The  book  of 
standards  will  probably  make  frequent  reference  to  cer- 
tain form  numbers,  so  that  this  book  of  printed  forms 
mil  have  to  be  frequently  consulted.  It  may  be  desirable 
to  have  several  copies  of  this  book  made  and  kept  up  to 
date. 

6.  A  list  of  all  the  impersonal  accounts  kept  in 
the  books  of  the  company.  Such  a  list  of  accounts  is  to 
be  followed  by  an  explanation  in  ledger  form,  showing 
what  are  the  ordinarj^  debits  and  credits  to  these  accounts 
and  how  they  are  to  be  closed  at  the  end  of  each  fiscal 
period  and  how  re-opened  at  the  beginning  of  each  new 
one.  This  description  of  accounts  must  clearly  explain 
which  are  controlling  accounts  and  which  are  subsidiary 
ones,   showing  plainly  just  what  type  of  transactions 


Standardisation  169 

each  subsidiary  account  covers,  and  just  what  subsidiary- 
accounts  each  controlling  account  covers. 

7.  A  detailed  list  of  all  reports  to  the  executive  as  well 
as  of  reports  to  the  board  of  directors  and  stockholders, 
together  with  specifications  as  to  the  form  of  such 
reports. 

Standardization  in  the  Production  Division 

Standards  in  this  division  will  refer  to  the  following: 
(a)  organization  of  production  division;  (b)  product; 
(c)  drawings;  (d)  patterns;  (e)  materials;  (f)  methods 
of  planning  and  supervising;  (g)  methods  of  processing; 
(h)  tools;  (i)  time  standards  for  machine  operations; 
(j)  time  standards  for  handling  operations;  (k)  em- 
ployes' efficiency  standards;  (1)  wage  standards;  (m) 
test  standards  of  product. 

Organization  of  the  Production  Division 

After  a  definite  conclusion  has  been  reached  as  to  the 
t}T)e  of  control  to  be  employed  in  the  production  division, 
the  general  organization  chart  of  this  division  must  be 
prepared,  also  the  departmental  charts  in  the  same  man- 
ner as  was  outlined  in  connection  with  the  administra- 
tive di\nLsion.  In  case  the  organization  involves  the 
inclusion  of  functional  control  in  an  establishment  where 
military  line  control  formerly  prevailed,  it  will  be  nec- 
essary to  define  clearly  in  the  charts  the  works  manager's 
limits  of  authority,  as  also  those  of  the  superintendent 
and  the  planning-department  heads. 

Standardization  of  Product 

This  involves  a  decision  on  the  number  of  styles  and 
sizes  of  product  which  are  to  prevail.  Many  industries 
adopt  standards  of  product  for  a  year.     This  custom 


170  Organization  and  Management 

still  prevails  in  the  automobile  industry,  although  even 
in  that  the  tendency  to  stick  to  well-tried  standards  is 
becoming  more  marked  each  year.  In  general  the 
changes  during  the  year  are  only  such  as  are  urgent  by 
reason  of  defects  or  new  inventions.  However,  the  last- 
named  type  of  changes  has  to  be  carefully  considered. 
An  over-enthusiastic  designing  department  with  plenty 
of  creative  talent  mil  naturally  wish  to  place  on  the 
market  a  continuous  stream  of  new  designs.  Where  the 
industry  is  a  large  one,  full  scope  is  given  to  this  type 
of  talent  by  assigning  a  building  (including  a  good  shop) 
to  the  construction  and  trying  out  of  new  models.  In  a 
smaller  industry  this  is  impossible,  but  developmental 
work,  important  as  it  is,  must  not  interfere  with  regular 
production. 

Standards  in  the  Drawing  Department 

The  standards  in  this  department  will  include  the 
division  of  the  drafting  work  into  (a)  designing,  of 
which  there  may  be  several  varieties,  such  as  drafting, 
tracing,  blue-printing,  and  filing;  (b)  the  adoption  of 
standard  sizes  of  drawings;  (c)  standards  as  to  quality 
of  tracing-paper,  tracing-cloth,  blue-print  paper,  and  sup- 
plies; (d)  standards  as  to  title  plates,  border  lines,  let- 
tering (see  Fig.  52) ;  (e)  mnemonic  symbols  for  parts 
(Pig.  53)  as  to  drilled,  reamed,  and  tapper  holes,  bolts, 
screws,  and  fastenings  in  general,  and  the  interchange- 
able use  of  minor  details,  such  as  gears,  bushings,  bear- 
ings, etc.;  (f)  the  adoption  of  definite  limits  of  accuracy 
required  in  various  kinds  of  fits  and  methods  of  design- 
ing these  limits  on  the  drawings;  (g)  forms  of  drawing 
lists  and  material  lists;  (h)  filing  of  tracings,  blue-prints, 
and  general  information  in   the  drafting  department. 


Standardization 


171 


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CD 

>- 
C/0 

UJ 

a. 


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bt) 

0 

a 

; ; 

3 
0 

a 

J 

T 


fa 


172 


Organization  and  Management 


This  last-named  item  is  of  great  importance  and  requires 
an  intelligent  man  to  take  charge  of  it. 

In  some  organizations  an  information  bureau  is  estab- 
lished under  the  general  supervision  of  the  head  of  the 


Cast  Iron 


w. 

Wy/ 

^ 

'^//  / 

/// 

// 

y// 

CLjCu. 

^// 

Wrought  Iron 


Malleable  Iron 


^ 

''^M- 

steel  Casting 


Machine  Steel 


Cast  Steel 


Brass 


Copper 


?/*■>  ^'.f — r  ■  '^vtyyi 


Lead 


Babbitt 


Rubber 


Aluminum 


Wood  Vulcanized  Fibre 

Fig.   53. — Standard   Cross-Hatchings   to   Eepresent  Materials  on   Drawings 
(Proposed  by  Oscar  E.  Perrigo  in  Iron  Trade  Review) 

planning  bureau,  such  information  bureau  being  located 
in  a  place  accessible  to  the  drafting  department,  purchas- 
ing department,  and  planning  room. 


Standardization  173 

The  Efficiency  Society  of  America  has  prepared  a 
bulletin  outlining  a  scheme  of  symbols  to  be  used  for 
filing  material  for  information  files,  which  may  be  made 
the  nucleus  of  a  system  adapted  to  any  particular  indus- 
try. For  example,  in  their  scheme  PRt  refers  to  produc- 
tion routine,  task;  PRtl  is  the  file  containing  papers, 
clippings,  etc.,  relating  to  motion  studies;  PTo  refers 
to  production  technique,  co-operation;  PTol  is  the  file 
containing  papers,  clippings,  etc.,  relating  to  suggestion 
systems. 

The  entire  bulletin  covers  twelve  pages,  in  which  an 
attempt  is  made  to  classify  all  topics  relating  to  indus- 
trial management,  with  a  symbol  for  each  topic.^ 

Standards  in  the  Pattern  Department 

In  such  industries  as  require  castings,  whether  of 
brass,  copper,  aluminum,  iron,  or  steel,  the  pattern  de- 
partment is  one  in  which  the  principle  of  standardization 
is  liighly  important.  The  following  are  the  important 
points  to  be  covered:  (a)  definite  authorization  as  to 
making,  altering,  or  repairing  patterns;  (b)  standard 
procedure  as  to  approval  of  requests  for  new,  altered, 
or  repaired  patterns  before  the  authorization  is  issued; 
(c)  the  determination  of  how  many  castings  are  to  be 
poured  from  an  existing  pattern  before  requested  altera- 
tions or  substitutions  of  new  patterns  take  effect;  (d) 
definite  standards  as  to  shrinkage  allowances;  (e) 
methods  of  accounting  for  material  and  labor  on  each 
pattern  job;  (f)  the  determination  of  which  patterns  con- 
stitute part  of  the  cost  of  an  order,  which  are  to  be 
considered   standard  patterns,   and   what   shall   be   the 

1  The  pamphlet  may  be  purchased  for  $1.00  from  the  Efficiency  Society 
of  America,  41  Park  Row.  New  York  City. 


174  Organization  and  Management 

method  of  valuing  standard  and  special  patterns  for 
inventory  purposes;  (g)  system  of  keeping  track  of 
location  of  all  patterns,  whether  in  storage  in  pattern- 
room,  and  if  so,  on  what  shelf  or  rack  and  in  what  aisle 
located,  and  if  at  foundry,  when  and  how  they  left  and 
when  they  should  be  returned. 

Standaeds  in  Materials 

Definite  specifications  must  be  prepared  covering  the 
nature  of  all  materials  of  production,  also  the  routine 
of  buying,  receiving,  and  storing,  as  explained  in  previ- 
ous chapters  relating  to  these  subjects. 

Methods  of  Planning  and  Supervising 

While  the  general  organization  chart  of  the  produc- 
tion division  ^vill  outline  broadly  the  functions  of  the 
planning  and  super\dsing  heads,  a  distinct  book  of  stand- 
ards for  the  planning  bureau  must  be  prepared,  explain- 
ing fully  the  routine  of  each  position  accompanied  by 
references  to  the  book  of  printed  forms  in  use  in  the 
various  branches  of  the  planning  bureau. 

Standards  in  Processing 

The  data  regarding  standards  of  processing  are  best 
filed  where  they  may  be  accessible  to  the  man  in  charge 
of  routing,  the  inspector,  the  man  in  charge  of  speeds 
and  feeds  of  machines,  the  men  in  charge  of  time  studies 
and  instruction  cards,  and  their  assistants.  These  data 
include  complete  information  in  regard  to  (a)  the  gen- 
eral process-mapping  of  the  business;  (b)  location  of  all 
machines  and  non-machine  processes;  (c)  existing  con- 
ditions of  all  machines  as  to  shaft,  pulley,  and  spindle 
speeds,  methods  of  changing  these  speeds,  together  with 


Standardization  175 

the  conditions  which  are  to  be  the  ultimate  standards; 
(d)  standard  speeds  and  feeds  for  stock  of  various  sizes 
and  degrees  of  hardness  for  machines  in  present  condi- 
tion, and  standard  speeds  under  conditions  ultimately 
to  be  reached  when  all  non-standard  conditions  on  ma- 
chines have  been  rectified;  (e)  standard  routing  for  all 
regular  product;  (f)  standard  instruction  cards  for  all 
regular  product. 

Standaeds  Relating  to  Tools 

In  a  metal-working  industry  these  standards  will  in- 
clude (a)  standard  shapes  for  forging  tools,  with  stand- 
ard templets  and  forge-shop  devices  for  adhering  to  these 
standards;  (b)  standard  specifications  for  heating  and 
cooling  tools  together  with  the  necessary  instruments 
for  this  purpose;  (c)  standardized  tool-grinding  with 
definite  exact  shapes  and  sjTnbols  for  each  shape;  (d) 
tool  lists  prescribed  for  every  piece  of  work  done;  (e) 
tool  storage  and  issuing  system.     (See  Figs.  54  and  55.) 

Time  Standards  foe  Machine  Operations 

Having  determined  for  each  machine  the  speeds  at 
which  it  shall  be  run  and  the  rapidity  at  which  either  the 
work  or  the  tool  shall  be  fed,  the  next  set  of  standards  is 
that  relating  to  the  time  of  the  machine,  as  a  machine 
only,  in  performing  the  various  operations.  These 
machine-time  standards  are  wholly  exclusive  of  handling 
time.  They  do  not  form  the  basis  for  compensation,  but 
are  absolutely  essential  when  used  in  connection  with 
the  standards  for  handling  operations  and  the  allowances 
for  length  and  frequency  of  rest  periods  and  unavoidable 
time  losses  in  making  up  the  ultimate  time  standards 
for  eflficiency  records  of  employes. 


176  Organization  and  Management 

DIRECTIONS  FOR  FORGIKG  TAYLOR  STAN- 
DARD SHAPE  CUTTING  TOOLS 

The  blacksmith's  work  on  tools  may  be  divided  into  four  operations 
common  to  all: 

1 — Cutting  the   bar  3 — Symbolizing. 

2 — Forging  the  nose.  4 — Hardening. 

The  first  main  operation,  that  of  cutting  the  bar,  is,  with  the  ex- 
eption  of  the  angle  at  which  the  nose-ead  is  cut,  the  same  for  all 
ypes  of  tools. 

The  operation  is  completed  as  follows  : 

FIRST-CUTTING  THE  BAR 

Mark  bar  to  be  cut  in  equal  lengths,  as  nenr  standard  as  possible, 
using  all  the  steel  in  it. 

At  every  second  mark  the  cut  is  made  at  9iP  and  the  cuts  between 
(for  the  nose-ends)  are  made — 

For  round-nose  tools at  6<P.       For  parting  tools at  90°. 

For  side  finishing  tools  .  .  at  90^.       For  t  bread  tools at  45'* 

For  square- nose  tools at  60"^. 

LENGTH  OF  TOOL H 


'90«  m'^\  SO' 

1 t         \ I__ 


TW1C£  LENGTH  OFJOOL 

FIG.  9. 

The  bar  thus  being  properly  marked,  first  with  chalk,  then  v.'ith 
chisel  cuts,  proceed  to  cut  it  into  lengths  as  follows: 

a — Put  in  fire  and  cut  off  twice  the  length  of  the   tool   with  a 

chisel. 
b — Put  the  bar  and  the  piece  cut  back  into  the  fire. 
c — Cut  off  the  second  double  length. 
d — Cut  the  first  double  length  in  two. 
e — Cut  off  the  third  double  length  from  the  bar. 
f  — Divide  the  second  in  two. 
Etc.,  etc. 
Lengths  for  standard  cutting  tools  are: 

For   ^-in.  tools — 11    inches.  For  l^-in.  tools — 21^  inches. 

For    |-in.  tools — 12J  inches.  For  1^ -in,  tools — 25    inches. 

For   |-in.  tools — 1 4 A  inches.  For  l|-in.  tools — 28^  inches. 

For   |-in.  tools — 16^  inches.  For  2  -in.  tools — 32.  inches. 

For  1  -in.  tools — 18   inches. 
Cut  off  all  the  tools  of  one  size  on  the  order  before  beginning  th« 
next  main  operation. 

Fig.   54.— Standards  as   to   Forging-Tools   to  be  Used  with   Taylor   Tool- 
Grinder  Manufactured  by  Tabor  Manufacturing  Company 


Standardization  177 

CLASSIP^lCATION  OF  TOOLS 

general  classes 

Class 

A  — Miscellaneous  tools  not  elsewhere  classified. 

B  — Bending  tools. — All  tools  for  producing  changes  in  shape 
by  bending,  folding,  spinning,  etc. 

C  — Clamps  and  holding  devices  of  all  kinds,  including  bolts 
and  screws. 

D  — Drilling  and  boring  tools. — Tools  that  remove  metal  from 
the  interior,  such  as  drills,  boring  bars,  cutters  and  all 
appliances  relating  to  them,  and  lathe-boring  tools,  etc. 

E  — Edge  tools. — Edge  tools  for  working  wood,  and  tools  for 
working  plastic  materials,  such  as  clay,  molding  sand, 
putty,  etc. 

F  — Heating  tools. — All  kinds  of  tools  used  for  heating,  light- 
ing, melting,  and  molding,  oil-tempering,  annealing,  dry- 
ing, cooking,  etc. 

H  — Hammers  and  all  tools  that  work  by  striking  or  being 
struck,  such  as  sledges,  tups,  etc.,  chisels,  sets,  flatters,  etc. 

L  — Transportation  tools. — All  tools  used  in  moving  materials 
from  one  place  to  another,  such  as  buckets,  boxes,  etc., 
trucks,  shovels,  wheelbarrows,  bogies,  brooms,  riggers' 
tools,  slings,  chains,  etc. 

]\I  — Measuring  tools. — All  instruments  of  precision,  weights, 
measures,  gauges,  etc.,  electrical  instruments,  etc. 

P  — Paring  tools. — All  tools  that  remove  metal  from  the  sur- 
face by  cutting,  except  slotter  and  milling  tools.  (See 
class  D  for  lathe-boring  tools.) 

R  — Milling  tools. — All  tools  for  milling  or  sawing  metal. 

S  — Slicing  tools. — All  parting  tools  and  slotter  tools. 

T  — Templets  and  all  instruments  for  duplicating  work,  in- 
cluding jigs  and  fixtures. 

U  — Abrading  tools. — All  tools  used  for  rubbing,  scraping,  fil- 
ing, grinding,  shearing,  punching,  breaking,  etc. 

W  — Wrenches  and  all  tools  used  for  causing  rotation. 

X  — Painting  tools. — All  tools  used  for  covering  a  surface  with 
an  adhesive  foreign  material,  and  any  for  removing  the 
same. 

Fig.  55. — Standard  Symbols  for  Classification  of  Tools,  as  used  by  Tabor 
Manufacturing  Company  in  connection  with  Taylor  Tool-Grinder 


178  Organization  and  Management 

Time  Standakds  for  Handling  Operations 

These  time  standards  are  the  results  of  time  and 
motion  studies  made  on  the  motion  elements  common 
to  various  machine  and  non-machine  operations  on  the 
product.  In  the  case  of  such  work  as  excavating,  wheel- 
ing dirt,  shoveling  dirt  or  ore,  mixing  concrete,  and 
certain  other  operations,  these  standards  have  been  re- 
duced to  mathematical  formulae.  These  time  standards, 
like  the  time  standards  for  machine  operations,  do  not 
by  themselves  form  the  basis  for  a  man's  output,  but 
combined  with  observational  data  as  to  length  and  fre- 
quency of  rest  periods  and  unavoidable  idle  time  they 
give  the  necessary  basis  for  the  efficiency  records  of 
employes. 

Efficiency  Standards 

The  only  system  of  rating  the  efficiency  of  emplo5^es 
which  has  a  mathematical  basis  is  one  comparing  the 
output  during  a  given  continuous  period  with  a  standard 
output.  Possibly  this  efficiency  may  be  multiplied  by  a 
numerical  attendance  percentage.  The  100  per  cent 
basis  of  time  on  an  indi\ddual  job  is  usually  a  combina- 
tion of  time  standards  on  machine  and  handling  time 
plus  allowances  for  rest  and  idle  time  and  an  addition 
serving  as  an  incentive.  However,  the  efficiency  of  an 
employe  rests  not  so  much  on  making  100  per  cent  here 
and  there,  now  and  then,  once  in  a  while,  as  on  his  ability 
to  make  a  high  percentage  right  along — in  other  words, 
on  his  percentage  of  success  in  a  given  pay  period.  For 
instance,  a  man's  percentage  of  reaching  the  spex^ified 
time  standards  on  all  jobs  in  a  given  pay  period  figures 
out  80.  His  attendance  is  90  per  cent.  His  combined 
efficiency  on  output  and  attendance  is  72. 


Standardisation  179 

There  liave  been  attempts  to  incorporate  such  factors 
as  skill,  cleanliness,  and  loyalty  in  the  efficiency  records 
of  employes,  but  unfortunately  there  are  no  measuring 
instruments  with  which  to  determine  an  exact  numerical 
basis  as  to  loyalty  and  cleanliness.  Accuracy  is  taken 
care  of  by  a  good  inspection  department,  and  no  reward 
for  quantity  of  production  is  given  where  quality  is  not 
up  to  standard.  Hence  the  tendency  is  to  measure  the 
efficiency  of  employes  by  output  and  attendance.  Any 
numerical  percentage  basis  of  rating  such  matters  as 
loyalty,  interest,  and  enthusiasm  must  depend  in  the 
last  analysis  on  the  judgment  of  some  superior  officer 
or  clerk.  This  leaves  chances  for  unfairness.  Hence  it 
is  best  not  to  combine  efficiency  percentages  depending 
on  exact  measurable  standards  w^ith  percentages  depend- 
ing on  personal  estimate  and  judgment. 

Wage  Standards 

No  matter  what  method  of  reckoning  wages  is  used  as 
an  incentive,  reward,  or  bonus,  a  fixed  scale  of  wage 
standards,  aside  from  the  incentive,  rew^ard,  or  bonus 
scheme,  should  be  established.  This  scale  of  standards 
will  include  the  following: 

1.  A  definite  rate  for  persons  on  trial  in  an  educa- 
tional try-out  division,  such  as  is  conducted  by  pub- 
lishing and  mail-order  houses  for  testing  applicants  for 
clerical  work.  The  paying  of  a  fixed  rate  during  this 
period,  such  rate  being  sufficient  to  cover  room-rent, 
board,  and  car-fare,  will  draw  applicants  from  a  wider 
territory  and  attract  a  better  class  of  applicants  than  if 
no  wages  at  all  are  paid  during  the  try-out  period. 

2.  A  definite  scale  for  each  class  of  apprentices,  includ- 
ing promotion  every  six  months.  There  are  usually  three 
classes  of  apprentices:    (a)   those  without  high-school 


180  Organization  and  Management 

training  or  who  have  had  only  a  year  or  two  in  high- 
school;  (b)  those  who  have  completed  high-school;  (c) 
those  who  have  had  a  college  course. 

3.  A  definite  scale  of  pay  for  each  handicraft  or  trade, 
with  a  definite  incentive  in  the  way  of  promotion  in  rate 
at  the  end  of  every  five  years '  connection  with  the  estab- 
lishment. For  instance,  if  the  rate  for  a  lathe-hand  is  30 
cents  an  hour  on  entering  service,  he  would  receive  at  the 
end  of  five  years  32  cents  an  hour  as  his  going  rate, 
entirely  aside  from  any  incentives,  rewards,  bonuses,  or 
premiums  which  he  might  secure.  At  the  end  of  ten 
years  he  would  receive  34  cents  an  hour.  At  the  end  of 
twenty-five  years'  service  he  would  receive  40  cents  an 
hour.  There  are  not  many  men  who  stay  twenty-five 
years  in  one  place,  and  if  they  do,  they  are  fully  worth 
the  increase  in  rate  indicated. 

4.  Definite  rates  as  to  overtime  work.  Overtime  work 
should  be  always  the  exception,  but  when  breakdowns 
occur  in  machiner}^  or  power  plant,  such  work  is  some- 
times unavoidable  and  should  be  paid  for  according  to  a 
definitely  fixed  scale. 

Standards  of  Testing  Product 

In  order  that  the  product  may  be  uniform,  there  must 
be  definitely  specified  inspections  and  tests  of  detail 
parts,  assembled  groups,  and  completed  product.  These 
specifications  must  be  put  into  written  form,  and  such 
printed  forms  as  require  to  be  filled  out  must  be  provided, 
also  instructions  to  inspectors  and  members  of  the  test- 
ing department,  instructing  them  just  how  each  test  is 
to  be  conducted.  The  standard  test  codes  of  the  national 
engineering  societies  on  such  matters  as  engine  and  boiler 


Standardization  181 

tests  and  similar  subjects  afford  good  patterns  for  such 
instructions.^ 

Standabdization  in  the  Selling  Division 

This  involves  standardization  as  to  the  organization 
of  this  division  along  the  same  lines  as  was  indicated  in 
discussing  the  organization  of  the  administrative  and 
production  divisions.  It  will  include  further  the  follow- 
ing standards:  (a)  standard  methods  with  regard  to 
agents  and  agencies;  (b)  standard  methods  of  establish- 
ing the  selling  price;  (c)  standard  methods  of  packing, 
shipping,  and  delivering;  (d)  standard  methods  of  prom- 
ising dates  of  delivery;  (e)  standard  methods  of  allowing 
discounts;  (f)  standard  routing  of  salesmen;  (g)  stand- 
ard method  of  going  after  and  following  up  ''prospects" 
by  correspondence  in  the  central  office  and  accompanying 
the  same  by  instructions  to  salesmen;  (h)  standard 
methods  of  advertising;  (i)  standards  as  to  selecting, 
compensating,  training,  and  promoting  salesmen. 

Permanence  of  Standards 

The  object  of  establishing  standards  is  to  insure  uni- 
formity of  procedure  along  the  lines  laid  out  by  the  most 
competent  authorities.  The  intent  is  to  leave  nothing  to 
the  well-meaning  caprice  or  ignorance  of  individuals. 
At  the  same  time  even  scientific  standards  are  subject  to 
revision  by  competent  authorities.  However,  such  re- 
visions do  not  occur  frequently.    The  same  general  prin- 

2  These  codes  may  be  obtained  from  the  secretaries  of  the  American 
Society  of  Mechanical  Engineers,  the  American  Institute  of  Electrical  En- 
gineers, the  American  Institute  of  Mining  Engineers,  and  the  American 
Society  of  Civil  Engineers,  New  York  City,  being  published  in  pamphlet 
form.  The  secretaries  of  these  associations  will  forward,  on  application, 
a  list  of  pamphlets  relating  to  standard  tests  and  other  standards,  together 
with  price  of  these  pamphlets. 


182  Organisation  and  Management 

ciples  apply  to  standards  in  a  given  industry.  A  definite 
committee  on  standards,  with  sub-committees  on  stand- 
ards in  various  subdivisions  of  the  industry,  may  ad- 
vantageously meet  quarterly  or  semi-annually  to  consider 
such  matters  as  may  be  laid  before  it. 

Essentials  of  Good  Standakds 

Dr.  Rapeer,  in  a  paper  before  the  Pennsylvania 
Educational  Association  in  December,  1914,  gave  the  fol- 
lowing requirements  for  good  standards : 

1.  They  should  take  the  indefinite  and  vague  and 
make  it  clear. 

2.  They  must  be  based  on  definite  scientific  laws,  or 
generally  agreed  upon  units  and  elements. 

3.  They  should  "hitch  our  w^agons  to  a  star,"  but  the 
hitch  must  be  long  enough  for  our  wheels  to  remain  on 
the  ground. 

4.  They  should  aim  to  bring  our  entire  population  to 
higher  levels  of  civilization.  Clocks,  sewing-machines, 
and  bath-tubs  are  rapidly  becoming  standard  elements 
of  American  homes,  where  but  a  few  decades  ago  they 
w^ere  absent. 

5.  They  must  aim  at  the  solution  of  dominant  life 
problems. 

6.  They  must  be  useful  in  times  of  change  when  new 
occasions  teach  new  duties. 


TEST  QUESTIONS 

1.  Give  some  examples  of  universal  standards. 

2.  In  what  way  is  standardization  of  advantage  to  business 
proprietors  ? 

3.  How   does   standardization   help    employes? 


Standardization  183 

4.  What  advantages  accme  to  the  consumer  as  a  result  of 
standardization  ? 

5.  How  may  the  proprietorship  be  injured  by  standardiza- 
tion? 

6.  In  what  way  may  employes'  interests  suffer  as  a  result  of 
standardization  ?    ' 

7.  How  may  standardization  be  disadvantageous  to  the  con- 
sumer ? 

8.  What  are  some  of  the  standards  that  may  be  adopted  in 
the  administrative  division  of  a  business? 

9.  Discuss  standardization  of  product. 

10.  What  standards  should  exist  in  the  drawing  department? 

11.  What  standards  should  be  established  in  the  pattern  de- 
partment ? 

12.  What  standards  should  be  established  in  connection  with 
planning  and  supervising? 

13.  What  standards  should  be  established  in  regard  to  tools? 

14.  Discuss  the  establishment  of  time  standards  in  machine 
operations  and  in  manual-labor  operations. 

15.  AVhat    standards  should   be   established   with   regard   to 
processes  ? 

16.  Discuss  efficiency  standards  for  employes. 

17.  Discuss  standards  in  testing  product. 

18.  Discuss  standards  in  relation  to  wages. 

19.  In  what  fields  can  standardization  be  estahlished  in  the 
selling  division? 

20.  List  some  of  the  essentials  of  good  standards. 


CHAPTER  XII 
scientific  management 

Broad  and  Narrow  Interpretation 

The  use  of  the  expression  *' scientific  management" 
assumes  that  there  is  such  a  thing  as  a  science  of  manage- 
ment. Since  the  briefest  and  most  commonly  accepted 
definition  of  science  is  knowledge  carefully  digested  and 
arranged,  we  may  define  the  science  of  management  in 
accordance  with  the  ordinary  conception  of  science. 

In  order  to  do  so,  however,  we  must  not  attempt  to 
confuse  with  our  definition  any  of  the  past,  present,  or 
future  aims  or  methods  of  scientific  management.  If  we 
were  to  define  the  science  of  explosives,  we  should  not 
attempt  to  discuss  in  our  definition  whether  the  ex- 
plosives were  to  be  used  for  digging  post-holes,  removing 
stumps,  or  waging  warfare.  If  we  were  to  define  the 
science  of  organic  chemistry,  we  should  not  enter  into  a 
discussion  of  the  merits  or  demerits  of  food  adulteration. 

A  definition  of  the  science  of  management  in  accord- 
ance with  our  requirements,  then,  would  be  the  obtaining, 
digesting,  and  arranging  of  all  obtainable  knowledge  re- 
lating to  the  conditions,  methods,  processes,  relations, 
and  results  in  the  field  of  management,  whether  that  field 
be  manuiactui'ing,  distributing,  municipal,  state,  or  na- 
tional government,  the  army  or  navy,  or  educational 
institutions  or  systems.    Having  gathered  ocir  data  and 

184 


Scientific  Management  185 

established  fundamental  principles  and  laws,  scientific 
management  would  be  management  in  accordance  with 
these  principles  and  laws. 

The  narrow  interpretation  of  the  term  '  *  scientific  man- 
agement" conceives  it  to  be  the  collection  of  the  visible, 
tangible  paraphernalia  used  by  one  or  another  expert  or 
group  of  experts  in  applying  so-called  "efficiency  meth- 
ods" to  some  particular  industry  or  activity. 

Can  a  Science  Have  Definite  Aims  ? 

The  science  of  management  like  the  science  of  accounts 
or  the  science  of  chemistry  is  a  valuable  tool  and  can 
be  made  to  serve  the  good  of  the  many  or  the  good  of 
the  few.  A  science  cannot  be  called  to  account  for  the 
improper  motives  of  those  who  may  use  it  as  a  tool.  No 
one  would  think  for  a  moment  of  attacking  great  chem- 
ists or  the  science  of  chemistry  because  it  has  been  made 
to  serve  the  base  purposes  of  food  adulteration.  No 
doubt,  valuable  data  for  the  science  of  management  could 
be  gathered  from  the  history  of  bands  of  train-robbers, 
political  machines,  and  "get-rich-quick"  concerns.  A 
keen  and  unprincipled  proprietor  could  also  utilize  the 
data  of  the  science  of  management  to  the  disadvantage  of 
his  employes  and  the  public. 

These  negative  aspects  of  the  uses  to  which  the  data 
of  all  sciences  have  been  put  are  here  mentioned  since 
they  are  frequently  brought  forward  in  connection  with 
scientific  management.  The  objectors  fail  to  realize  that 
the  information  and  data  disclosed  by  practically  every 
science  are  subject  to  equally  grave  negative  uses.  Shall 
we  condemn  psychology  because  the  clairvoyant  makes 
use  of  it?  Such  a  policy  would  be  contrary  to  scientific 
research  of  any  kind. 

A  science  as  such  can  have  no  motives.  Those  who 
apply  it,  however,  do  have  motives,  and  they  will  apply 


186  Organization  and  Management 

it  to  carry  out  their  motives.  Of  scientific  management 
as  thus  far  appHed  in  American  manufacturing  establish- 
ments it  can  safely  be  said  that  the  motives  of  the  pro- 
prietors of  the  industrial  establishments  in  which  it  has 
been  fully  developed  have  been  eminently  fair  toward 
employe  and  consumer.  The  Link-Belt  Mfg.  Company, 
of  Philadelphia,  the  Tabor  Mfg.  Company,  of  Philadel- 
phia, and  the  Franklin  Motor  Car  Company,  of  Syracuse, 
N.  Y.,  are  examples  of  shops  in  which  scientific  manage- 
ment has  been  applied  in  a  manner  which  reflects  most 
favorably  on  those  responsible  for  the  application.  Dr. 
Taylor  clearly  states  again  and  again  his  aim  as  the  at- 
tainment of  lower  cost  of  production  coupled  with  higher 
wages.  In  general  the  aims  of  the  leaders  in  the  field  of 
scientific  management  are  the  attainment  of  the  most 
efiicient  conditions,  methods,  processes,  relations,  and 
results  in  management. 

The  term  "efficiency"  as  here  used  has  also  a  broad 
and  a  narrow  interpretation.  The  broad  interpretation 
of  efficiency  conceives  it  as  the  conservation  principle  in 
its  most  general  application.  It  conceives  it  as  the  min- 
imum of  waste  not  only  in  the  material  and  capital  of 
the  proprietor,  but  as  the  minimum  of  waste  also  of 
human  health,  energy,  and  happiness,  and  as  the  minimum 
of  waste  of  the  nation's  natural  materials,  as  well  as  the 
development  of  the  greatest  distributed  general  purchas- 
ing power  among  the  community  at  large.  A  narrow 
interpretation  would  consider  a  narrow  part  of  this 
broad  application,  irrespective  of  its  relation  to  the  other 
elements. 

The  Application  of  Scientific  Management 

In  order  to  apply  scientific  management  we  must  first 
famiharize  ourselves  with  the  known  published  data  of 


Scientific  Management  187 

the  science  of  management,  and  next  conduct  such  re- 
searches as  give  us  the  particular  data  needed  in  regard 
to  our  own  enterprise.  In  certain  industries  these  data 
are  most  expeditiously  secured  through  the  medium  of 
time  and  motion  studies.  In  other  phases  of  manage- 
ment even  of  these  same  industries,  and  in  other  fields 
to  which  we  may  wish  to  apply  scientific  management,  the 
securing  of  data  means  a  great  deal  more  than  the  taking 
of  time  and  motion  studies.  We  may  have  to  consult  the 
data  of  related  sciences,  such  as  economics,  psychology, 
chemistry,  and  other  natural  and  applied  sciences,  includ- 
ing engineering,  education,  and  sociology. 

Having  secured  by  careful  investigation  of  known 
data,  supplemented  by  our  own  research,  all  the  data 
practically  available  and  ascertainable,  our  next  task  is 
the  establishment  of  standards.  The  requirements  of 
good  standards  have  been  set  forth  in  the  preceding 
chapter.  Just  as  we  speak  of  one  man's  standards  of 
morals  or  ethics  being  different  from  another  man's,  so 
the  management  standards  of  one  business  will  differ 
from  those  of  another,  reflecting  to  a  considerable  extent 
the  ideals  of  the  management. 

The  leaders  in  scientific  management  contend  that 
standards  must  not  aim  to  benefit  any  one  particular 
individual  or  group  of  individuals  to  such  an  extent  that 
unfairness  is  shown  to  any  other  individual  or  group. 
While  it  is  true  that  business  is  engaged  in  primarily 
for  the  profit  of  the  proprietorship,  public  sentiment  is 
too  altruistic  to  permit  the  success  in  the  long  run  of  a 
business  whose  standards  aim  at  the  profit  of  the  pro- 
prietorship only,  and  neglect  the  rights  of  employe  and 
consumer. 


188  Organization  and  Management 

In  general  we  may  siunmarize  that  the  application  of 
scientific  management  to  a  given  activity  involves : 

1.  The  securing  of  data. 

2.  The  establishment  of  standards. 

3.  Securing  means  for  appljdng  the  data  and  stand- 
ards. 

4.  Securing  means  for  seeing  that  the  data  and  stand- 
ards are  utilized. 

5.  Providing  means  for  further  investigationto  secure 
new  knowledge. 

6.  Securing  the  maximum  of  prosperity  for  employer, 
employe,  and  consumer. 

The  Securing  of  Data 

There  are  several  most  interesting  publications  show- 
ing the  unprejudiced  and  painstaking  research  work 
required  to  secure  the  data  necessarj^  for  scientific  man- 
agement. Among  these  are  Taylor's  Art  of  Cutting 
Metals,  Gilbreth's  Brick-laying  System  and  Concrete 
System,  and  Taylor  and  Thomson's  Concrete.  In  his  ex- 
periments on  metal-cutting  Taylor  conducted  over  50,000 
experiments  involving  the  removal  by  cutting  tools  of 
over  800,000  pounds  of  steel,  at  a  cost  of  nearly  $200,000. 

The  data  investigated  relate  not  only  to  the  materials, 
machines,  and  methods,  but  also  to  the  scientific  selection 
and  study  of  the  workers  as  a  result  of  the  physical  and 
psychologic  qualifications  of  the  men  best  able  to  perform 
the  various  duties. 

After  the  data  have  been  secured  they  are  reduced  to 
standards.  The  previous  chapter  of  this  text  has  already 
discussed  quite  fully  the  question  of  standards  and  stand- 
ardization. Another  chapter  will  be  devoted  to  the  im- 
portant question  of  time  and  motion  studies.    These  aim 


Scientific  Management  189 

to  reduce  industrial  processes  to  units.  These  units  vdW 
relate  to  machine  operations  and  to  non-machine 
operations. 

Applying  the  Data  and  Standakds 

The  application  of  the  data  and  standards  discovered 
in  a  study  of  scientific  management  involves  the  question 
of  organization  and  control  as  well  as  equipment.  For 
example,  it  is  quite  likely  that  we  may  wish  to  regroup 
existing  departments  and  place  in  charge  of  a  function- 
alized  controlling  system  those  men  in  our  existing  organ- 
ization best  adapted  to  carrying  out  the  function  at  the 
head  of  which  it  is  proposed  to  place  them. 

Next  it  is-  essential  to  see  that  the  data  and  standards 
are  utilized.  This  requirement  demands  that  there  must 
be  provided  a  sufficient  force  of  teachers  and  demon- 
strators to  work  with  those  who  are  to  utilize  the  data 
and  standards  to  get  them  into  successful  use.  The 
teachers  and  demonstrators  must  be  capable,  enthusiastic, 
and  sympathetic  optimists  with  pleasing  address.  There 
must  be  a  decided  incentive  for  success  offered  the 
workers. 

Making  Further  Investigations 

Certain  investigators  must  be  continuously  at  work 
along  lines  which  are  not  routine,  in  the  effort  to  devise 
improved  methods  and  effect  further  economies.  These 
investigators  will  include  not  only  members  of  the  staff, 
but  also  men  in  the  ranks  competing  for  a  reward  through 
the  medium  of  a  well-organized  suggestion  system. 

There  is  also  a  national  organization  known  as  the 
Society  for  Promotion  of  the  Science  of  Management  and 
limited  in  membership  to  persons  who  have  done  actual 
work  in  promoting  the  science  of  management,  which 


190  Organization  and  Management 

society  endeavors  to  promote  research  work  by  govern- 
ment bureaus,  by  engineering  colleges,  and  by  experts  on 
their  own  initiative. 

Securing  the  Maximum  of  Prosperity  foe  All 
Concerned 

This  requirement  demands  that  (a)  the  proprietorship 
shall  receive  the  largest  dividends  which  can  reasonably 
be  expected,  giving  due  consideration  to  the  interests  of 
employes  and  consumers;  (b)  the  employes  must  re- 
ceive not  only  the  highest  prevailing  wage  accorded  to 
their  various  crafts,  but  incentives,  financial  and  other- 
wise, to  encourage  high  standards;  (c)  to  the  consumer 
must  be  given  his  share  of  the  benefit  of  improved 
methods  by  reducing  the  price  to  him  of  articles  for 
which  in  the  past  he  has  been  paying  a  higher  price,  or 
he  is  to  receive  a  better  article  at  no  increased  price. 

Taylor's  Principles  of  Scientific  Management 

The  chief  aim  of  scientific  management  as  formulated 
by  Mr.  Taylor  is  the  lowering  of  costs  of  production 
coupled  with  higher  pay  for  labor.  He  stated  that  this 
aim  is  to  be  attained  through : 

1.  The  working  up  for  every  activity  or  industry  a 
science  to  replace  the  traditional  or  rule-of-thumb  knowl- 
edge possessed  by  all  connected  with  the  activity. 

2.  The  scientific  study  of  the  workers — finding  out  the 
human  characteristics  required  for  every  class  of  work 
in  the  given  activity. 

3.  Bringing  the  science  to  the  workers  through  the 
medium  of  the  planning  department  and  the  functional 
instructors  in  the  shop. 

4.  The  assumption  by  the  management  of  its  due  share 
in  the  foregoing  three  divisions. 


Scientific  Management  191 

Conclusions  of  the  American  Society  of  Mechanical. 

Engineers 

A  committee  of  the  American  Society  of  Mechanical 
Engineers  made  an  extensive  canvass  and  investigation 
in  order  to  determine  the  leading  principles  of  manage- 
ment, and  reported  the  following: 

1.  The  planning  of  the  processes  and  operations  in 
detail  by  a  special  division  organized  for  this  purpose. 

2.  Functional  organization,  by  which  so  far  as  pos- 
sible each  man  superintending  the  workmen  is  respon- 
sible for  a  single  line  of  effort  instead  of  intrusted 
with  a  combination  of  executive,  legislative,  and  judicial 
functions. 

3.  The  training  of  the  worker  in  the  best  methods. 

4.  Equitable  payment  of  the  workers  based  on  quan- 
tity and  quality  of  individual  output. 

Obstacles  in  the  Way  of  Scientific  Management 

Taylor  in  his  book  Shop  Management  stated  that 
the  principal  obstacles  in  the  way  of  scientific  manage- 
ment are : 

1.  ''Soldiering"  by  the  workers,  this  being  due  to  (a) 
ignorance,  (b)  intentional  through  fear  of  reduction  of 
piece  rates  or  of  over-production  and  the  employes' 
''working  themselves  out  of  a  job." 

2.  The  ignorance  of  the  management. 

The  publishers  of  the  American  Magazine  printed  seri- 
ally in  their  issues  of  March,  April,  and  May,  1911,  a 
group  of  papers  on  "The  Principles  of  Scientific  Manage- 
ment," by  Frederick  W.  Taylor.  As  a  result,  hundreds 
of  letters  came  to  the  publishers  of  the  magazine  from 
all  over  the  world  mentioning  objections  and  obstacles. 


192  Organization  and  Management 

Dr.  Taylor  turned  these  letters  over  to  Mr.  Frank  B. 
Gilbreth,  who  answered  them  in  a  small  and  very  interest- 
ing book  written  for  the  general  public  and  entitled  ''A 
Primer  of  Scientific  Management." 
In  general  the  obstacles  may  be  classified  as: 

1.  Objections  by  the  proprietorship. 

2.  Objections  by  employes. 

Objections  by  Pkopeietors 
These  objections  are  the  following : 

1.  It  involves  too  high  an  overhead  or  manufacturing 
expense. 

2.  It  disorganizes  well-established  relations. 

3.  Employes  studying  about  the  methods  of  scien- 
tific management  will  become  discontented  with  actual 
conditions. 

OVERHEAD  OR   MANUFACTURING  EXPENSE 

Experience  has  showTi  that  a  remarkably  increased  out- 
put can  be  obtained  with  the  same  number  of  employes 
assisted  by  a  competent  expert,  after  scientific  manage- 
ment has  been  established.  To  be  sure,  certain  employes 
classed  formerly  as  "producers"  would  be  put  under 
the  traditional  designation  of  ''non-producers,"  since 
they  are  now  planners  and  instructors  instead  of  mechan- 
ics. So  long  as  production  has  been  increased  and  costs 
reduced,  what  difference  does  it  make  whether  an  arbi- 
trary classification  of  planning  and  instructing  work  into 
non-productive  or  overhead  cost  makes  that  class  of 
expense  higher  than  under  traditional  methods  ? 

DISORGANIZING   OF   ESTABLISHED  RELATIONS 

Scientific  management  cannot  be  installed  in  a  month 
or  even  in  a  year.    It  can  seldom  be  introduced  in  less 


Scientific  Management  193 

than  three  years,  and  it  may  take  t\\dce  that  time.  When 
time  enough  is  taken,  the  process  is  an  evolution  and  not 
a  revolution.  Experience  has  demonstrated  that  even 
during  the  transitional  period  the  balance  sheet  shows 
favorable  results  financially. 

DISCONTENTMENT  WITH  TRADITIONAL,  CONDITIONS 

Instead  of  being  a  danger,  this  element  is  a  favorable 
sign,  since  employes  as  well  as  the  management  will  be 
interested  in  securing  the  ultimate  results. 

Objections  by  Employes 
These  are  chiefly: 

1.  It  is  humiliating  to  have  a  man  stand  over  you  with 
a  stop-watch. 

2.  Working  under  standardized  instruction  throttles 
initiative. 

3.  The  employer  having  found  out  the  highest  possible 
speed  will  cut  the  rate  of  pay. 

4.  Too  many  bosses. 

5.  Pay  based  on  individual  merit  is  contrary  to  the 
principle  of  collective  bargaining. 

STOP-WATCH  observations 

These  are  taken  only  in  order  to  determine  elements 
of  machine  and  handling  operations.  They  are  taken  on 
trained  workers  who  are  paid  an  advanced  rate  of  pay 
while  acting  as  demonstrators.  A  time  study  should 
never  be  taken  on  a  man  without  his  consent  or  surrepti- 
tiously. Due  allowances  are  always  made  for  rest  periods 
of  adequate  length  and  frequency  when  the  time  elements 
are  assembled  into  instruction  cards.  Experience  has 
sliown  that  in  plants  where  scientific  management  has 


194  Organization  and  Management 

been   introduced   the   men   enjoy   participating   in   the 
research  work  of  time  and  motion  study. 

PREVENTION  OF  INITIATIVE 

The  opportunity  for  initiative  lies  in  the  rewards 
offered  in  a  well-managed  suggestion  system.  Sug- 
gestions are  always  welcomed,  but  the  employe  must 
submit  to  the  discipline  of  teachers  and  demonstrators 
whose  instructions  are  based  on  the  co-operative  study 
of  the  best  workers  in  the  plant  in  establishing  existing 
standards.  If  a  worker  sees  a  new  and  better  way,  he 
reports  it  in  the  form  of  a  suggestion,  and  is  adequately 
rewarded  when  his  suggestion  is  found  workable  and 
adopted. 

CUTTING  THE  BATE   OF  PAY 

Any  employer  who  is  sufficiently  progressive  to  intro- 
duce scientific  management  knows  that  all  advocates  of 
scientific  management  condemn  rate-cutting  as  the  worst 
defect  of  traditional  management.  It  is  a  procedure 
which  the  management  should  guarantee  will  not  occur 
under  any  circumstances.  It  does  not  take  much  fore- 
sight to  appreciate  the  fact  that  rate-cutting  would  put 
an  end  to  all  efforts  for  co-operation,  and  that  there  can 
be  no  such  thing  as  scientific  management  or  even  con- 
tinued success  of  the  business  under  any  form  of  manage- 
ment where  this  vicious  practice  is  indulged  in.  If  your 
management  can't  be  trusted,  it  is  best  to  quit  anyway. 
It  is  fair  to  assume  that  it  is  honest  until  proved  other- 
wise. 

TOO  MANY  BOSSES 

In  actual  practice  the  presence  of  functional  bosses  is 
not  noticed,  but  the  results  of  their  activities  are  very 


Scientific  Management  195 

manifest.  Instead  of  asking  what  to  do  next  or  where 
to  find  the  tools,  drawings,  or  material,  the  mechanic  is 
relieved  of  concern  as  to  these  matters,  the  next  job, 
together  with  the  tool  list,  tools,  instruction  card,  and 
bonus  schedule,  being  ready  for  him  before  he  finishes 
the  work  on  which  he  is  at  present  engaged.  If  he  has 
trouble  and  needs  help,  a  competent  helper  will  come  to 
his  aid. 

COLLECTIVE   BARGAINING 

Scientific  management  has  no  controversy  relative  to 
collective  bargaining.  It  recognizes  a  minimum  day  or 
hourly  rate  for  every  craft  and  is  wdlling  to  pay  the  maxi- 
mum prevalent  scale.  It  does  demand,  however,  that  each 
worker  perform  his  duties  in  accordance  mth  instructions 
and  it  reserves  the  right  to  pay  additional  wages  to  the 
most  efiicient  workers  over  and  above  the  rate  arrived  at 
as  a  result  of  collective  bargaining. 


TEST  QUESTIONS 

1.  What  is  your  definition  of  scientific  management? 

2.  "What  have  the  leaders  in  the  field  of  scientific  management 
stated  as  their  aims? 

3.  What  consecutive   steps  are  involved  in  the  application 
of  scientific  management  to  a  given  industry? 

4.  How  are  data  secured  for  scientific  management? 

5.  After  the  data  are  secured  what  means  are  to  be  adopted 
for  applying  them  ? 

6.  How  can  the   utilization  of  data  and  standards  be  en- 
forced ? 

7.  What  methods  should  be  adopted  to  carry  on  continuous 
investigations  and  researches? 

8.  How   can   proprietorship,    employes,   and   consumers   get 
their  respective  shares  of  the  benefits  of  scientific  management? 


196  Organisation  and  Management 

9.  What  are  Taylor's  definitions  of  the  aims  and  principlea 
of  scientific  management? 

10.  What  are  the  principles  of  management  as  reported  by  the 
committee  on  management  of  the  American  Society  of  Mechanical 
Engineers? 

11.  What  does  Taylor  state  as  the  principal  obstacles  in  the 
way  of  scientific  management? 

12.  Compare  the  manufacturing  expense  factor  under  scientific 
management  witli  that  under  traditional  management. 

13.  Discuss  the  possible  disorganization  of  existing  relations 
after  the  introduction  of  scientific  management. 

14.  What  is  the  proper  way  to  take  stop-watch  observations? 

15.  Discuss  the  effect  of  scientific  management  on  the  initiative 
and  inventive  spirit  of  employes. 

16.  How  is  the  compensation  of  the  worker  affected  in  the  long 
run  by  scientific  management? 

17.  How  does  scientific  raanagBment  contrive  to  make  it  pos- 
sible for  a  worker  to  be  supervised  by  a  number  of  different 
bosses  ? 

18.  Discuss  the  relation  of  collective  bargaining  to  scientific 
management. 

19.  In  what  ways  does  scientific  management  bring  the  em- 
ployers and  the  employes  into  closer  relations? 

20.  How  would  you  apply  scientific  management  so  as  to  avoid 
the  criticism  that  it  makes  a  mere  tool  or  machine  of  the  worker  ? 


CHAPTER  Xni 
time  and  motion  studies 

Definitions 

Time  study  is  the  analysis  of  any  process  into  the 
smallest  elements  or  sub-operations  into  which  it  can  be 
divided.  These  processes  may  be  manual  or  mental  or 
machine  processes.  The  elements  may  be  preparatory, 
supplementary,  consecutive,  or  simultaneous.  After  the 
analysis  indicated  has  been  made,  each  element  is  exam- 
ined and  investigated  as  a  separate  unit. 

Motion  study  is  the  investigation  of  the  movements 
involved  in  each  element,  with  the  object  of  eliminating 
all  waste.  This  waste  may  be  waste  of  time,  energy, 
health,  materials,  or  tools.  Motion  study  involves  con- 
sideration of  such  factors  as  experience,  skill,  content- 
ment, fatigue,  training,  habit,  and  prejudice. 

Standard  Elemental  Operations  and  Times 

Standard  elemental  operations  are  such  as  repeat 
themselves  again  and  again  on  all  kinds  of  work.  They 
include  the  following:  ''Pick  up  tools,"  "Walk  to  vise," 
''Lay  down  tools,"  "Set  work  into  machine,"  "Clamp 
work  into  machine, "  "  Raise  work  from  floor  to  machine. ' ' 
It  will  be  seen  that  work  of  several  varieties  can  be  classi- 
fied as  to  weight  and  shape,  and  fastening  can  be  classified 
according  to  various  sizes  and  styles  of  clamps  and  bolts. 

197 


198 


Organization  and  Management 


Eaising  from  floor  to  machine  may  be  classified  as  to 
various  sizes  and  weights,  and  as  to  whether  the  raising  is 
by  hand,  by  hoist,  or  by  crane,  etc. 
It  is  assumed  that  prior  to  undertaking  time  studies  all 


TOOL  LIST 

FOR 


MACHINE  No.    L.    10 


OPERATION 

Exercise  #4 

DRAW.  Nos.  504 


PIECES 


NAME 


SIZE 


TOOL  SYMBOL 


Haimner 


1   l/g 


H>    M.    M^ 


Center  Puncti 


H  •    C  •    G  • 


Hermaphrodl 


tea   6" 


M.  C.  F»  H. 


Lfl.thp>  Tool 


r/bxi" 


P>  V.  V.  A* 


P.  R.  S,  E. 


Steel  Seal  e. 


_6!L 


3U  fi,  S, 


Caliper 


^!L 


W,  C.  F.  S. 


Center  Gauge 


M>    G.    A. 


Fig.  56.— Tool  List 

possible  efforts  will  already  have  been  made  to  stand- 
ardize the  procedure  of  getting  material,  tools,  drawings, 
clamps,  and  other  fastening  devices.  For  example. 
Figure  56  shows  the  tool  list  for  the  work  illustrated  in 
the  subsequent  figures.    The  next  procedure  is  the  listing 


EXERCISE  

/7^ 

f 

TIME  STUDY  OBSERVATION 

SHEET 

DATE  STARTED       '    '  / 1 T 

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tor 

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e  actually  appUed 

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operation. 

n 


Time  and  Motion  Studies  199 

of  all  the  detail  operations  without  any  attempt  at  accu- 
rate timing.  Figure  57  illustrates  the  time-study  obser- 
vation sheet.  The  broad  column  with  the  heading  ' '  Detail 
Operation"  is  first  filled  in  by  the  obsei^^er.  In  some 
cases  it  will  take  two  or  three  sets  of  observations  to  list 
these  details  when  the  process  of  taking  time  studies  is 
first  being  initiated. 

Method  of  Timing  Observations 

Figure  58  shows  a  board  arranged  to  hold  the  time- 
study  observation  sheet,  the  sheets  being  held  to  the 
board  by  a  so-called  giant  or  bulldog  clip.  At  the  upper 
left-hand  corner  of  the  board  is  a  projection  with  cup 
hooks  arranged  to  hold  the  stop-watch.  The  operator 
starts  and  stops  the  watch  mth  the  left  hand  while  he  is 
taking  notes  with  the  right  hand,  as  shown  in  the  figure. 
The  stop-watch  has  the  minute  divided  into  100  divisions 
instead  of  into  seconds.  This  makes  it  easier  to  calculate 
the  elapsed  time  or  individual  time,  as  indicated  in  the 
alternate  columns  on  Figure  57.  The  watch  is  so  ar- 
ranged that,  after  ha\dng  been  stopped,  it  can  be  started 
again  for  the  second  operation  at  the  point  at  which  it 
was  stopped  instead  of  being  thrown  back  to  zero.  This 
feature  enables  us  to  stop  the  watch  whenever  any  un- 
usual interruption  takes  place.  It  also  gives  us  the  total 
elapsed  time  from  the  start  of  the  first  reading. 

Moving  Pictukes  as  an  Aid  to  Time  Study 

Mr.  Frank  B.  Gilbreth  has  used  with  marked  success 
the  motion  camera  as  an  adjunct  to  scientific  manage- 
ment. While  actually  performing  his  work  the  mechanic 
is  photographed  by  the  macliine.  His  every  movement  is 
recorded  on  the  films.  As  he  works,  a  specially  designed 
clock  is  so  placed  as  to  appear  in  the  picture,  recording 


200  Organization  and  Management 

the  exact  time  taken  by  every  movement.  The  clock  dial 
is  about  30  inches  in  diameter  and  has  a  pointer  which 
makes  ten  complete  revolutions  of  the  dial  in  a  minute. 
The  dial  itself  is  divided  into  100  parts,  so  that  each  move- 
ment of  the  pointer  represents  1/1000  of  a  minute.  A 
permanent  record  is  thus  secured.  The  expert  is  enabled 
to  study  the  operation  in  detail  for  the  purpose  of  elim- 
inating all  useless  motions.  The  unnecessary  motions  of 
the  workman  having  been  so  clearly  revealed,  new  and 
shorter  ways  of  doing  the  job  are  devised. 

At  the  plant  of  the  New  England  Butt  Company,  Provi- 
dence, R.  I.,  a  job  which  formerly  required  371/2  minutes 
is  now  done  in  Sy^  minutes  as  a  result  of  the  micro-motion 
study.  In  many  other  jobs  the  time  has  been  cut  do\vn 
until  the  work  is  now  done  in  from  one  half  to  one  fourth 
of  the  former  time.  When  a  workman  reaches  out  his 
hand  to  pick  up  a  tool,  the  time  of  the  movement  is  shown 
by  the  film.  By  noting  the  position  of  the  pointer  on  the 
clock  in  the  picture  showing  the  beginning  of  the  move- 
ment, and  its  position  in  the  picture  showing  the  end  of 
the  movement,  the  precise  time  is  ascertained. 

It  is  in  the  analysis  of  these  motions  that  the  moving- 
picture  machine  has  been  utilized  by  Mr.  Gilbreth.  Close 
study  of  the  films  showed  that  a  great  many  of  the  mo- 
tions of  the  various  workmen  were  wholly  unnecessary — 
also  that  a  great  deal  of  useless  work  was  done  in  picking 
up  pieces  from  boxes  and  trucks  on  the  floor  when  these 
pieces,  if  arranged  on  an  assembling-board,  could  be 
reached  for  and  put  into  position  in  a  much  shorter  time. 
As  a  result,  various  styles  of  so-called  ''assembling- 
boards"  were  designed  upon  which  cheaper  help  in  the 
stock  room  placed  the  various  lighter  parts  of  machines 
to  be  assembled.  When  the  expert  mechanic  was  ready  to 
assemble  the  machine,  the  use  of  the  assembling-board 


Fig,  58. — Method  of  Mounting  Observation  Sheet  and  Stop-Wateh  on  Board 
for  Taking  Time- Study  Observations 


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Time  and  Motion  Studies  201 

eliminated  a  great  deal  of  the  time  formerly  lost  in  bend- 
ing down  and  stooping  over. 

Mapping  Motions 

Another  device  used  by  Mr.  Gilbreth  consists  in  attach- 
ing a  small  electric  light  bulb  to  the  hand  of  the  operator, 
the  bulb  being  connected  by  flexible  wiring  with  a  battery 
or  other  source  of  current.  The  light  in  the  vicinity  of 
the  operator  is  slightly  darkened  so  that  the  electric  light 
in  the  hand  rather  than  the  man  and  machine  will  be 
recorded  on  the  photographic  plate.  The  camera  is 
trained  on  the  worker  as  he  performs  the  operation  which 
is  under  investigation.  The  plate  is  exposed  as  long  as  is 
necessary  for  the  completion  of  several  complete  paths  of 
motions. 

When  the  plate  is  developed,  it  will  show  a  line  of 
light  traced  in  an  irregular  path.  The  figures  of  the  man 
and  machine  may  be  faintly  visible,  but  they  do  not  count. 
The  main  thing  is  the  path  made  by  the  light  which  shows 
exactly  the  path  that  the  operator's  hand  traversed  in 
the  operation  (Fig.  59).  Where  the  light  has  passed 
two  or  three  times  over  the  same  path  it  will  be  expanded 
to  a  broader  band.  This  band  is  an  accurate  record  or 
map  of  the  motion  which  is  being  studied. 

In  the  majority  of  cases  it  will  be  found  that  the  path 
is  not  in  a  straight  line,  but  represents  a  curve  more  or 
less  complicated.  The  straight  line  would  be  shorter.  The 
problem  then  resolves  itself  into  providing  such  fixtures, 
stands,  or  tools  that  the  path  may  be  shortened,  and  also 
that  the  workman  may  be  trained  in  new  habits  of  motion 
such  as  will  assist  in  shortening  the  path. 

Where  the  record  of  light  shows  a  path  full  of  twists 
and  angles,  Mr.  Gilbreth  reasons  that  something  must  be 
the  matter  with  the  arrangement  of  the  parts  which  the 


202  Organization  and  Management 

band  must  reach.  For  example,  at  the  plant  of  the  New 
England  Butt  Company  one  of  the  plates  showed  that  the 
operator  of  a  certain  machine  made  a  considerable  reach 
of  the  hand  in  order  to  seize  a  certain  lever.  The  opera- 
tion had  become  habitual,  and  even  the  trained  eye  of  the 
efficiency  expert  failed  to  note  that  there  was  any  unneces- 
sary movement.  The  photographic  record,  however, 
showed  that  this  reaching  was  an  extra  complication 
which  resulted  in  some  loss  of  time.  The  mechanism  of 
the  machine  was  altered  so  that  the  lever  was  within  short 
reach  of  the  workman. 

In  order  to  introduce  the  time  element,  Mr.  Gilbreth 
devised  a  disc  whose  revolutions  make  or  break  the  elec- 
tric current  leading  to  the  lamp  on  the  operator's  hand. 
Instead  of  a  continuous  line  or  band  the  photograph  of 
the  machine  will  now  show  a  line  of  dots  and  dashes.  By 
gearing  the  disc  which  makes  and  breaks  the  circuit  to  a 
definite  speed  the  number  of  flashes  in  a  second  is  known. 
If  there  are  ten  flashes  in  a  second  and  a  line  representing 
movement  of  the  hand  shows  thirty  flashes,  the  motion 
has  taken  three  seconds.  The  shape  of  the  flash,  blunt  at 
one  end  and  sharp  at  the  other,  shows  in  which  direction 
the  motion  was  made.  Mr.  Gilbreth  has  designated  this 
type  of  motion  record  as  a  cyclegraph,  since  each  plate 
records  the  complete  cycle  of  motion. 

Figure  60  illustrates  the  clock  used  in  micro-motion 
study  work.  Figure  61  shows  a  cinematograph  motion 
study  being  taken  at  the  New  England  Butt  Company.  It 
will  be  noticed  that  the  floor  and  backgi'ound  are  cross- 
sectioned  so  as  to  make  more  easy  the  determination  of 
surrounding  conditions  and  motions.  Figure  62  shows 
a  tj'pical  set  of  micro-motion  pictures.  The  cross-sec- 
tioned background  has  the  heavj^  lines  12"  apart  and 
the  light  lines  4''  apart.    An  inspection  of  the  pictures 


.    105HDCT    16.2 

GILBRETH   CLOCK 

HEW  EKGL4H0  BUTT  CO  " 

>>    W.5.11  lOfU' 

Fig.  60.— The  Gilbreth  Clock 

This  clock  records  1   1000  of  a  second.    It  shows  the 

exact  time  taken  by  every  motion  made 

by   the  workman. 


£-»■ 


WW 


Fig.  01. — Time  and  Motion  01)servations  by 

means  of  the  Moving-Picture  Camera 

It  is   sometimes   diflicnlt   for  the  workman   to   concen- 
trate   liis   attention    upon    liis   work   when   sub- 
jected to  the  movins-pieture  ordeal.    The 
mechanic    shown     in    this    picture 
is  unconsciously   "posing." 


Fig.  62. — Moving  -  Picture 
Film  ITsed  in  Studying 
Assembly  of  Small  Ma- 
chines 


Fig,    63. — The   Eack    from    which   the    Workman   Assembles    the   Different 
Parts  of  the  Machine  He  is  Making 


Fig.  64. — Group  of  8tu(l('nts  Taking  TimfStudy  Observation  in  the 
Machine  Shop  of  the  Pennsylvania  State  College 


Time  and  Motion  Studies  203 

shows  that  it  takes  a  man  one  second  to  let  go  of  the  work 
he  w^as  doing  and  get  his  hands  to  the  assembling-board. 
Figure  63  shows  an  assembling-board  with  the  various 
parts  of  the  braider  machine  arranged  in  sequence  of  use 
in  assembling  the  various  features  for  holding  the  parts 
which  have  been  designed  particularly  mth  reference  to 
use  and  quickness  of  grasping. 

Qualifications  of  Time-Study  Observer 

It  is  desirable,  although  not  absolutely  essential,  that 
the  observer  be  trained  in  the  trade  under  observation. 
He  need  not  necessarily  be  an  expert.  He  should  be 
patient,  diplomatic,  and  unprejudiced.  College  training 
in  laboratory  practice  in  which  a  man  has  become  accus- 
tomed to  taking  accurate  readings  is  good  preparation 
for  this  work,  provided  it  has  been  followed  by  some  shop 
training  in  the  trade  involved. 

The  workman  on  whom  the  time  study  is  made  should 
always  be  informed  of  its  purpose,  and  his  interest  and 
co-operation  secured.  Time  study  for  the  purpose  of 
getting  the  motion  and  time  elements  should  always  be 
made  on  first-class  men,  and  such  percentage  of  extra 
time  added  in  establishing  a  time  lioiit  as  will  afford  an 
incentive  for  the  average  man. 

It  is  customary  to  pay  an  advance  over  a  man's  ordi- 
nary rate  when  he  is  acting  as  a  subject  for  time 
and  motion  studies.  This  extra  pay  is  in  no  sense  in  the 
nature  of  a  bribe,  but  it  is  in  recognition  of  the  fact  that 
the  man  is  being  called  upon  to  assist  in  a  higher  grade 
of  work,  since  he  and  the  time-study  man  are  now  doing 
team  work  of  a  research  nature,  which  is  a  higher  grade 
of  work  than  ordinary  production.  The  workman  may 
be  called  upon  by  the  time-study  man  to  stop  suddenly  in 
the  midst  of  a  process,  and  to  think  about  certain  motion 


204 


Organization  and  Management 


elements  involved,  and  discuss  whether  these  elements 
are  ordinary  practice,  or  whether  a  certain  improvement, 
short  cut,  or  device  suggested  by  the  time-study  man  is 
feasible  or  not,  and  many  similar  matters. 

Preparation  of  the  Instruction  Card 

Figure  65  shows  a  drawing  of  the  part  on  which  the 
time-study  observations  showTi  in  Figure  57  were  taken. 


U.  S  S*an<*QrrfT35r»orf    _     -  _ 

LfJ^t  hand   TAre^tf        ^  /?(o  A^,A«nrf /A  reo  rf 

^  //  T/i,reai<3  tt  (Ae  (Kih 

J-  C  TfoLLBD    SrCEL 


FlG.  65. — Drawing  of  Piece  on  which  Time-Study  Data  Were  Taken  Shown 

in  Fig.  57 


Figure  66  shows  the  instruction  card  which  is  the  syn- 
thetic or  constructive  result  of  the  analji;ic  or  observa- 
tional operation  known  as  the  time  study.  It  will  be 
noticed  that  in  the  instruction  card  each  element  or  sub- 
operation  is  distinctly  listed  and  the  standard  time  which 
has  been  agreed  on  is  listed  after  each  sub-operation. 

After  the  time-study  work  has  progressed  to  such  an 
extent  that  a  considerable  variety  of  standard  elemental 


Time  and  Motion  Studies  205 

operations  and  times  have  been  listed  and  filed,  the  build- 
ing-up of  the  instruction  card  for  a  new  piece  will  consist 
very  largely  in  assembling  these  standard  elements,  leav- 
ing only  a  few  elements  remaining,  for  which  the  time  can 
frequently  be  figured  from  known  data,  so  that  the  actual 
time-study  work  becomes  less  all  the  time,  and  the  result 
of  every  additional  time  study  becomes  more  and  more 
extensive.  Figure  64  shows  a  group  of  students  at  the 
Pennsylvania  State  College  taking  time-study  observa- 
tions in  the  machine  shop. 

Doing  the  Work  According  to  Instructions 

Where  the  men  have  never  worked  under  instruction 
cards,  it  will  require  patient  and  systematic  training  and 
an  insistence  on  careful  reading  and  following  of  the 
individual  steps  of  the  elemental  operation  instructions. 
At  the  beginning  men  who  have  been  accustomed  to 
looking  at  the  time  consumed  on  a  job  merely  in  the  light 
of  the  total  time  are  apt  to  consider  impossible  the  time 
reductions  indicated  on  most  instruction  cards. 

The  writer  had  experience  of  this  sort  in  the  assembling 
of  automobiles  and  of  engine-governors.  After  consid- 
erable preliminary  work  in  planning  and  getting  mate- 
rials and  tools  ready,  accompanied  by  careful  time 
studies,  it  was  decided  to  offer  a  bonus  in  the  case  of 
automobile-assembling,  beginning  at  100  total  hours  of 
assemblers'  time.  The  best  previous  record  had  been 
225  hours.  With  careful  handling  of  the  men  the  time 
was  reduced  at  the  first  to  90  hours  and  ultimately  it  was 
a  common  occurrence  for  the  total  assembling  time  to 
take  no  longer  than  65  or  70  hours.  In  the  case  of  steam- 
engine  governors  a  great  deal  of  time  had  been  lost  by 
reason  of  poor  fits  and  the  necessity  of  having  the  assem- 
blers do  a  great  deal  of  filing.     After  the  adoption  of 


206 


Organization  and  Management 


INSTRUCTION  CARD  FOR  OPERATION 

SHEETS.  SHEET  No. 

DRAWING  No.   MACHINE  No. 

ORDER  No. 

MATERIAL          CLASS  No. 

PIECES 

DESCRIPTION  OF  OPERATION      Ceater.Faoe.Turn.GrooTe, Thread 

ITEM 

DETAILED  INSTRUCTIONS 

FI£D 

SPEED 

Eloxa 

CMIMraaui 

1 

Pick  up  toole 

.07 

2 

Walk  to  vise 

.0? 

3 

Lav  down  toola 

.02 

4 

PIr.V   lip    nhnik    ftiTl    chalk  both   ends 

.11 

5 

Lay  doyn  chalk  and  pick  up  center  and  sorlber 

.02 

6 

nfint.or  both  ends 

.25 

7 

X.B.y  down  norlber-  and   Pick  up  center  punch 

.0? 

8 

Piinch  both  ends 

.25 

9 

pick    lip    tonln 

.06 

10 

WhIV    hnr.V    t.n    manhtne 

.04 

n 

Lav  down  tools  and  Pick  up  center  drill 

.04 

12 

Walk   to   apeed   lathe 

.OR 

13 

.03 

14 

Put.  fli-ni   In  chuck 

.44 

15 

Start  machine 

,02 

16 

AdjUHt   tail   stock 

.06 

17 

Drill  both  ends 

.30 

18 

Stop  machine 

.02 

19 

Tftkfi   out   drill 

.28 

20 

Walk  bnok   t/>  naohlne 

.07 

21 

Lav  down  drill  and  pick  up  doR 

»06 

22 

Put  do;^  in  piece 

.oe 

23 

Piit  pinr.fl  between  centers  and  ad.1UBt 

.25 

24 

Pick  up  aide   tool 

.10 

25 

5ot     olHn    tool 

.40 

26 

Rtart   machine 

.05 

27 

Ohango   speed  and  feed 

.10 

28 

Face   first   end 

1.33 

29 

Kt.np  machine 

.02 

30 

Take   nut   piece 

.10 

31 
32" 

.10 

-30 

33 

Put.    do  J   on    ploce 

.15 

34 

Put  Piece  between  centers  and  adjust 

.23 

35 

•  OS 

36 

►inlob    fni-.n    to    length 

1.06 

37 

.OS 

38 

Take  out   elde  and   put   in  round 

.17 

Month 

D.y 

Yur 

Si«ncd 

Checked 

Fig.  66. — Instruction  Card  for  the  Piece  Shown  in  Fig.  65 


Time  and  Motion  Studies  207 

standard  limits  on  the  parts  which  were  to  be  fitted 
together,  the  total  time  of  assembling  governors  was 
reduced  to  about  one-third  of  the  former  time. 

A  skilled  demonstrator  or  leader  needs  to  remain  with 
the  workers  until  they  are  able  to  do  the  tasks  specified 
in  the  instruction  cards,  and  within  the  time  limits  desig- 
nated. When  a  job  has  reached  the  stage  where  it  is- 
continuously  done  in  the  time  specified,  it  can  be  safely 
left  alone.  Frequently,  however,  after  considerable  sav- 
ings have  been  made  on  work  done  by  an  experienced 
man  or  group  of  men,  when  a  new  man  or  group  of  men 
undertakes  the  same  task,  it  takes  a  much  longer  time. 
Under  these  circumstances  it  is  quite  likely  that  the 
ser^dces  of  the  demonstrator  or  leader  will  be  again 
required. 

Allowances  for  Exceptional  Conditions 

Where  there  is  a  difference  in  the  quality  of  material, 
such  as,  for  instance,  in  cast  iron  or  cast  steel,  in  which 
there  are  frequently  as  many  as  three  classes  of  hardness 
recognized,  a  definite  procedure  should  be  agreed  on 
regarding  alterations  in  the  surface  speed  and  depth  of 
cut  to  be  used,  together  with  the  consequent  results  to  be 
put  in  the  time  standards  of  the  instruction  sheet.  In 
case  there  is  a  functional  foreman  in  charge  of  the  feeds 
and  speeds,  he  would  be  the  man  to  pass  judgment  on  the 
quality  of  the  metal.  In  case  there  is  no  such  official,  the 
foreman  would  be  the  man  to  make  the  decision. 

There  should  be  no  allowances  made  for  the  cleaning 
of  a  machine  while  the  work  is  in  process  of  being  done, 
or  of  any  oiling  not  specified  on  the  instruction  sheet.  In 
case  of  delay  for  making  a  necessary  repair,  this  should 
be  approved  by  the  functional  repair  boss,  if  there  is  such 


208  Orfjanization  and  Management 

a  man  in  the  organization,  or,  in  the  absence  of  such  a 
boss,  by  the  foreman. 

Time  Study  Does  Not  Mean  Driving 

Scientific  time  study  recognizes  the  fact  that  the  worker 
must  not  use  too  much  strength  and  vitality  at  one  stretch. 
This  is  important.  It  is  not  only  requisite  to  know  that 
in  some  classes  of  work  the  necessary  rest  periods  aggre- 
gate two  hours  a  day,  while  in  certain  other  classes  of 
work  they  are  as  high  as  one-half  of  the  total  working 
time.  It  is  necessary  also  to  know  how  long  a  man  should 
work  between  the  rest  intervals  in  order  to  avoid  fatigue. 
For  example,  in  the  case  of  a  skilled  drop-hammer  black- 
smith, we  might  know  that,  generally  speaking,  a  man 
would  need  to  rest  approximately  one-half  of  the  work- 
ing time.  We  shall  have  to  know  also  whether  it  is  best 
to  work  five  minutes  and  rest  five  minutes,  or  to  work 
ten  minutes  and  rest  ten  minutes.  This  information  can 
be  gained  only  by  careful  experiment. 

It  must  also  be  borne  in  mind  that  interest  in  one's  work 
will  lessen  fatigue.  Hence  a  man's  mental  attitude  to- 
wards his  work  means  a  great  deal.  The  development  of 
loyalty  and  enthusiasm  among  the  employes,  as  well  as 
the  employment  of  the  right  sort  of  men  to  take  the  time 
studies,  \vill  do  much  towards  keeping  up  the  man's  in- 
terest in  the  work.  A  suitable  system  of  extra  remunera- 
tion for  work  done  in  accordance  with  instructions,  and 
within  the  time  limits  specified,  will  also  tend  to  keep  up 
the  interest,  especially  if  each  job  is  made  the  subject  of 
a  distinct  bonus  chart  applicable  to  the  particular  ma- 
cliine,  or  to  conditions  at  the  particular  production  center 
where  the  work  is  being  done. 

The  scientific  determination  of  the  amount  of  fatigue 
after  continuous  exertion  of  various  kinds  and  for  certain 


Time  and  Motion  Studies  209 

lengths  of  times  has  been  investigated  by  various  experi- 
mental psychologists.^  One  method  employed  is  to  utilize 
an  instrument  recording  by  electrical  contact  with  the 
pulse  the  rapidity  and  pressure  of  the  pulse,  which  acts 
as  an  indicator  of  the  fatigue. 

Where  the  facilities  are  not  at  hand  to  make  scientific 
tests  to  determine  the  frequency  and  length  of  pauses  and 
rest  periods,  the  common-sense  and  good  judgment  of  an 
experienced  observ^er  of  the  methods  pursued  by  the 
workers  who  show  a  combination  of  greatest  output  with 
least  fatigue  must  decide  the  questions.  The  power  of 
i-esisting  fatigue  varies  with  training,  occupation,  sur- 
roundings, an^l  the  constitution  of  the  individual.  Where 
the  work  is  repetitious  for  a  long  time,  a  change  in  posi- 
tion will  frequently  afford  a  change  in  blood-pressure, 
which  mil  prevent  fatigue.  To  this  end  special  stools 
have  been  devised  with  foot  and  back  rests,  so  that  the 
position  is  easily  changed.  Fatigue  is  worthy  of  study 
in  every  industry.  Workmen  must  be  taught  to  husband 
their  energies,  as  fatigue  interferes  not  only  with  their 
industrial  efficiency,  but  also  with  their  social  efficiency. 

Inspection 

A  thorough  system  of  inspection  is  a  necessary  accom- 
paniment of  any  system  employing  instruction  cards,  time 
standards,  and  bonuses.    The  system  of  inspection,  to  be 

1  The  following  authors  have  contributed  to  the  literature  of  fatigue: 
J.  Golilmark,  Fatigue. 
F.  S.  Lee,  Fatigue. 
A.  Mosso,  Fatigue. 

F.  M.  Strattou,  Experimental  Psychology. 
C.  S.  Yoakum,  An  Experimental  Study  of  Fatigue. 
Adelson,  Mental  Fatigue. 
Aral,  Mental  Fatigue. 


210  Organization  and  Management 

thorough,  involves  the  employment  of  floor  inspectors 
who  accompany  the  move-material  men  in  transferring 
work  in  process  from  department  to  department.  The 
move-material  men  move  from  one  department  to  the  next 
such  work  as  is  approved  by  the  inspectors.  In  some 
well-equipped  establishments  a  motor-driven  truck  pro- 
vided with  storage  batteries  is  used  to  facilitate  the  rapid 
transportation  of  work  in  process,  move-material  men, 
and  inspectors  from  department  to  department. 

The  Expense  of  Time  Studies 

It  must  be  borne  in  mind  that,  after  standard  elemental 
operations  have  been  timed,  these  operations  \vill  be 
found  to  repeat  themselves  again  and  again,  so  that  the 
time  spent  in  a  complete  analysis  of  a  new  job  is  trivial 
after  time  study  has  been  well  established.  At  the  begin- 
ning of  time-study  work  it  may  take  several  days  to 
analyze  a  job,  while  after  six  months  of  time-study  work 
a  similar  job  would  take  but  a  few  minutes  by  reason  of 
standardized  data  available. 

Desirability  of  Publishing  Time-Study  Data 

It  is  unfortunate  that  the  great  accumulation  of  time- 
study  data  which  have  been  gathered  in  various  machine 
shops  cannot  be  published  and  made  available.  It  is  hoped 
that  educational  institutions  and  goverimient  bureaus  will 
undertake  the  determination  of  standard  time  elements 
in  various  classes  of  work  and  publish  them  for  the  benefit 
of  the  public. 

TEST  QUESTIONS 

1.  What  is  time  study? 

2.  What  is  motiou  study,  and  how  does  it  differ  from  time 
study  ? 


Time  and  Motion  Studies  211 

3.  What  are  standard  elemental  operations  ? 

4.  Why  is  it  advisable  to  make  the  standardization  of  ele- 
mental operations  the  first  and  most  important  phase  of  time 
and  motion  study  work? 

5.  Describe  in  detail  the  method  of  timing  observations  with 
a  stop-watch. 

6.  What  are  the  qualifications  of  time-study  observers? 

7.  Describe  the  application  of  moving  pictures  to  time-study 
work. 

8.  Describe  the  cyclograph  method  of  mapping  motions. 

9.  How  is  the  instruction  card  built  up  from  time  studies? 

10.  Why  is  it  desirable  to  inform  the  workman  to  be  studied 
that  time  study  is  to  be  made  on  him? 

11.  How  may  we  assist  and  encourage  men  in  doing  work  in 
accordance  with  instruction  cards? 

12.  What  allowance  should  be  made  for  variable  conditions? 

13.  How  would  you  meet  the  objection  that  time  studies  and 
instruction  cards  tend  to  drive  men? 

14.  How  would  you  meet  the  objection  that  time  studies  and 
instruction  cards  make  machines  of  men? 

15.  What  attention  must  be  given  to  instructions  when  men 
are  working  under  instruction  cards? 

16.  What  is  the  argument  justifying  the  expense  of  time 
studies  ? 

17.  In  what  way  does  the  element  of  fatigue  enter  into  the 
establishment  of  time  standards? 

18.  How  do  you  account  for  the  opposition  of  organized  labor 
to  time  studies  ? 

19.  Discuss  the  advisability  of  publishing  time-study  data. 

20.  What  methods  have  you  to  suggest  whereby  proprietor, 
worker,  and  consumer  could  secure  their  fair  share,  respectively, 
of  the  benefits  of  time  and  motion  studies? 


CHAPTER  XIV 

WAGE  SYSTEMS 

GrENERAL  CLASSIFICATION  OF  WaGE  SySTEMS 

The  methods  which  have  been  devised  for  remunerating 
labor  may  be  classified  into  three  general  groups,  as 
follows : 

1.  Time  work,  in  which  the  employe  is  paid  by  the 
hour,  the  week,  the  month,  or  the  year. 

2.  Contract  work,  including  (a)  the  ordinary  piece- 
rate  method,  (b)  the  differential  piece-rate  method,  (c) 
the  collective  contract,  whereby  a  contractor  agrees  to 
furnish  the  labor  for  a  certain  quantity  of  product  at  a 
certain  price,  the  contractor  selecting  his  own  method  of 
remunerating  those  who  work  for  him. 

3.  Bonus,  efficiency,  or  premium  systems,  including 
(a)  promotion  systems  under  day  rate  as  a  reward  for 
increased  efficiency,  (b)  the  Halsey  premium  system,  (c) 
the  Rowan  premium  system,  (d)  the  bonus  system,  (e) 
the  efficiency  system,  (f)  combinations  of  the  above. 

Time  Work 

Under  this  system  in  its  usual  form  there  is  no  record 
of  the  individual's  performance.  There  is  no  incentive 
for  effort  except  of  such  a  sort  as  will  result  in  the  em- 
ploye's being  designated  as  a  ''good  man"  by  tlie  foreman 
or  other  superior.     There  is  no  penalty  for  ordinary 

212 


Wage  Systems  213 

inefRciency  or  time-killing.  As  soon  as  we  introduce  any 
kind  of  reward  for  individual  efficiency,  we  are  departing 
from  the  traditional  time  work  or  day  rate,  even  though 
our  reward  may  be  of  a  sort  which  is  not  recognized 
among  the  so-called  bonus  or  premium  systems  of  pay. 

It  is  possible  to  introduce  time  and  motion  studies  and 
insti'uction  cards,  together  with  standardized  routing, 
scheduling,  moving  of  material,  and  functional  foreman- 
ship  in  connection  with  the  traditional  day  rate ;  but  un- 
less some  inducement  is  offered  to  the  employe  to  reward 
him  for  sustained  effort  to  follow  out  the  instruction 
cards  and  for  his  success  in  so  doing,  together  mth  some 
penalty  for  failure  to  put  forth  effort,  we  shall  not  realize 
more  than  a  fractional  part  of  the  advantages  which  can 
be  gained  from  standardization  and  planning.  Some  ad- 
vantage will  surely  accrue  in  the  way  of  economies  and 
avoidance  of  waste  in  materials  and  labor — indeed,  the 
advantage  gained  will  be  such  as  to  pay  for  the  work 
done  and  also  a  handsome  profit ;  but  unless  a  reward  is 
offered,  there  will  be  too  many  cases  of  backsliding  and 
neglect  of  the  instruction  cards. 

Proper  supervision  as  well  as  standardization  and 
planning,  and  good  working  conditions,  such  as  are  devel- 
oped by  proper  welfare  activities,  will  go  a  great  way 
toward  remedying  time  losses  under  a  day-rate  system. 
These  conditions  are,  in  fact,  necessary  prerequisites 
to  the  introduction  of  any  other  system  of  remuneration. 
It  is  always  desirable  to  leave  the  wage  question  as  the 
last  problem.  This  placing  it  at  the  end  of  the  list  does 
not  mean  that  it  is  a  problem  to  be  feared  or  avoided,  or 
that  it  is  of  minor  importance.  It  is  a  problem  to  be  met 
in  a  liberal,  tolerant  manner,  but  it  must  be  met  and 
solved,  since  it  is  of  vital  importance. 


214  Organization  and  Management 

If  America  is  to  maintain  its  industrial  standing,  it 
must  practice  to  the  fullest  extent  conservation  of  labor- 
energy  while  at  the  same  time  securing  the  highest  effi- 
ciency out  of  its  labor-energy.  America's  aim  is  to  have 
the  highest  paid  labor  in  the  world.  This  means  that  we 
must  face  international  competition  at  home  as  well  as 
abroad.  There  is  hardly  any  establishment  or  undertak- 
ing in  which,  no  matter  how  variable  the  individual  items 
of  product  made,  the  elemental  sub-operations  are  not 
repetitious.  Hence,  time  standards  are  practically  uni- 
versally ascertainable,  and  our  verdict  on  time  wage  with 
no  stimulus  for  the  loyal  and  efficient  and  no  punishment 
for  the  disloyal  and  inefficient  is  that  it  is  merely  a 
temporary  expedient. 

The  foregoing  remarks  apply  to  the  crude  traditional 
class  of  day  work  in  which  the  workmen  of  a  given  trade 
or  handicraft  are  paid  a  class  rate,  regardless  of  indi- 
vidual merit.  As  soon  as  we  have  established  elemental 
time  standards  and  instruction  cards,  we  begin  to  realize 
that  good  workers  are  worth  twice  or  three  times  as  much 
as  poor  ones.  This  immediately  suggests  some  system 
of  compensation  or  promotion  under  the  day-rate  method 
that  will  recognize  individual  merit.  Such  a  scheme  will 
naturally  fall  under  our  grouping  of  efficiency  methods  of 
compensation  and  is  not  to  be  considered  under  tradi- 
tional day  rate. 

Oedinaey  Piece  Rate 

The  principle  of  the  piece-rate  system,  which  proclaims 
pay  for  measurable  results  rather  than  for  time  service, 
w^ould  at  first  sight  seem  to  indicate  the  substitution  of 
free  contract  for  paternalism  and  vassalage.  If  em- 
ployers were  always  fair  and  workers  always  reasonable, 
ordinary  piece  rate  would  be  mathematically  fair.    The 


Wage  Systems 


215 


system  has  been  so  badly  abused,  however,  that  there  is 
a  tremendous  prejudice  against  it.  It  has  come  to  be 
associated  with  the  sweat-shop  system  where  the  cupidity 
of  the  employer  sets  the  piece  rates  so  low  that  only 
excessively  long  hours  and  high  speed  enable  the  worker 
to  eke  out  an  existence. 


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Output    and    Decreases   with    Lessened    Output    Under    Ordinary 

Piece  Rate 


Piece  rate  has  been  used  as  a  bait  to  speed  up  em- 
ployes to  a  certain  pace  and  then,  when  that  pace  was 
reached  at  which  a  certain  class  of  workers  earned  more 
pay  than  the  proprietorship  considered  they  were  worth, 
the  rate  was  cut.  After  several  such  cuts  the  system 
produced  nothing  but  fear  and  hostility  together  with 
intentional  loafing  on  all  new  work,  so  as  to  get  the 
piece  rate  set  as  high  as  possible,  since  it  was  bound  to  be 
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216  Organisation  and  Management 

rate  so  long  as  methods,  tools,  and  machines  are  not 
changed. 

When  time  reductions  are  in  no  way  the  result  of  effort 
on  the  part  of  the  employe,  a  change  in  rate  cannot  be 
called  a  cut.  For  example,  the  introduction  of  high-speed 
tool  steel  enabled  machine-tool  operators  to  run  their 
lathes  so  as  to  have  a  surface  speed  from  two  to  three 
times  as  great  as  had  been  possible  under  former  condi- 
tions with  the  use  of  carbon  tool  steel.  A  doubled  output 
was  easily  obtainable  without  the  workman's  being  com- 
pelled to  exert  himself  any  more  than  with  the  old  steel. 
On  the  other  hand,  the  company,  under  these  circum- 
stances, can  afford  to  pay  a  piece  rate  slightly  in  excess 
of  one  half  the  former  piece  rate,  since  there  is  likely  to 
be  also  a  saving  in  view  of  the  fact  that  a  larger  quantity 
of  output  is  turned  out  without  a  correspondingly  greater 
increase  in  the  overhead  rate  or  manufacturing  expense. 
Figure  67  shows  how  normal  pay  increases  and  decreases 
under  ordinary  piece  rate. 

Differential  Piece  Rate 

The  differential  piece  rate  consists  of  two  rates :  (1)  the 
ordinary  piece  rate,  which  is  paid  a  man  for  a  nonnal  or 
ordinary  output,  and  (2)  a  higher  rate,  which  is  paid  per 
piece,  if  a  man  turns  out  more  than  an  ordinary  output. 
It  is  quite  apparent  that  the  reasoning  in  the  case  of 
differential  piece  rate  is  entirely  different  from  that 
which  resulted  in  cuts  under  the  traditional  piece-rate 
methods.  Under  the  differential  piece-rate  system  the 
workman  not  only  has  no  fear  of  the  rate 's  being  cut,  but 
he  has  a  tremendous  incentive  to  earn  high  pay,  in  view 
of  the  fact  that  he  receives  an  exceptionally  high  reward 
for  accomplishing  good  results. 


Wage  Systems  217 

For  example,  assuming  that,  as  the  result  of  time  study 
and  the  building-up  of  an  instruction  card,  it  is  shown 
that  a  piece  of  work  can  be  done  in  30  minutes.  In  order 
to  allow  for  necessary  rest  periods  and  avoid  lost  time,  60 
per  cent  is  added  to  the  possible  time,  an  increase  of  18 
minutes  as  an  incentive,  making  48  minutes  the  normal  or 
average  man 's  time.  In  an  eight-hour  day  w^e  should  have 
480  minutes ;  hence,  the  normal  average  output  of  an  ordi- 
nary man  would  be  ten  such  pieces.  Under  the  differential 
piece-rate  system  there  would  now  be  two  rates  offered, 
say,  for  example,  30  cents  per  piece  for  an  output  of  ten 
or  less,  and  35  cents  per  piece  for  an  output  of  more  than 
ten.  It  will  be  seen,  therefore,  that  if  the  man  produces 
ten  pieces,  his  earnings  for  the  day  ^vould  be  $3.00, 
whereas,  if  .he  turns  out  eleven  pieces,  his  earnings  rise 
to  $3.85. 

It  is  argued  that  this  system  would  tend  to  make  a  man 
exert  himself  beyond  the  limit  of  good  health.  In  reply 
to  this  we  can  say  that  the  man  has  an  instruction  card 
showing  that  the  work  can  be  done  in  30  minutes,  so  that, 
^vithout  any  rest  periods  whatever,  the  output  would  be 
sixteen  pieces  in  an  eight-hour  day.  The  workman  is 
given  instructions  in  regard  to  the  percentage  of  rest 
periods  applicable  to  each  class  of  work. 

Assuming  this  to  be  lathe  w^ork,  he  is  told  that  the  total 
of  rest  periods  should  aggregate  20  per  cent  of  the  time. 
Of  course,  it  is  possible  to  take  some  of  these  rests  while 
the  tool  is  doing  work ;  hence,  it  would  be  entirely  possible 
to  turn  out  thirteen  or  fourteen  of  these  pieces  in  a  day 
with  abundant  time  allowance  for  rest.  The  company  can 
afford  to  offer  the  increased  piece  price,  because  the  cost 
of  operating  a  machine  tool,  including  power,  light,  heat, 
rental  for  floor  space,  tools,  oiling,  repairs,  etc.,  is  likely 
to  be  as  great  as  the  rate  of  the  mechanic  who  is  operat- 


218 


Organization  and  Management 


ing  the  machine,  and  the  day  rate  of  the  machines  remains 
very  nearly  stationary  while  the  output  increases.  Figure 
68  shows  how  under  the  differential  piece  rate  the  pay 
per  piece  increases  at  a  more  rapid  rate  as  time  is 
reduced  than  under  ordinary  piece-rate. 

This  last  point  may  be  illustrated  mathematically.  Let 
us  assume  in  the  above  case  that  the  cost  of  operating  the 
machine  is  35  cents  an  hour.     The  formula  for  determin- 


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Fig.  68. — Chart  Illustrating  How   Pay   Increases  Under  Differential  Piece 
Eate  at  a  More  Rapid  Rate  as  Time  Per  Piece  is  Reduced  than 
Under  Ordinary  Piece  Rate 


ing  the  direct  labor  and  machine  cost  per  piece  will  be 

Machine  rate   X   hours  +  piece  rate   X   number  of  pieces 


Number  of  pieces 


Cost  per  piece 


If  a  poor  workman,  then,  turns  out  only  eight  pieces 
during  an  eight-hour  day,  the  cost  per  piece  then  will  be : 


35X8+30X8 


=65  cents 


Wage  Systems  219 

If,  on  the  other  hand,  a  workman  turns  out  eleven 
pieces,  the  cost  per  piece  will  be  as  follows : 

35X8+35X11 

=601^  cents 

11 

You  will  observe  that  in  the  first  case  the  workman 
earns  $2.40  per  day  and  the  cost  to  the  employer  is  65 
cents  per  piece.  In  the  second  case,  the  workman  with 
his  higher  piece  rate  earns  $3.85  a  day,  while  the  cost  per 
piece  to  the  employer  is  only  60y2  cents.  This  illustra- 
tion shows  how  both  employer  and  employe  may  profit 
under  a  properly  adjusted  wage  system  of  this  kind. 

Collective  Contract  Work 

Where  work  is  repeated  over  and  over  again  in  consid- 
erable volume,  the  practice  exists  of  making  a  contract 
with  competent  workmen  whereby  they  are  to  furnish  a 
certain  number  of  pieces  at  a  specified  price.  Under  this 
arrangement  the  contractor  employs  his  own  men,  while 
the  company  furnishes  the  material,  buildings,  equip- 
ment, and  tools. 

This  contract  system  is  quite  generally  employed  in 
several  of  our  larger  locomotive  shops.  An  inspection  of 
these  shops  indicates  that  there  is  considerable  loss  due 
to  the  contractor's  requisitioning  more  material  and  fin- 
ished parts  than  he  actually  requires,  so  that  there  is  an 
accumulation  of  surplus  parts  which  have  to  be  returned 
to  stock,  or  made  over,  if  possible,  or  scrapped.  The 
contractor  claims  that  these  overdrafts  are  necessary  be- 
cause of  the  possibility  of  defects  or  poor  fits.  It  is  also 
claimed  that  the  contractors  are  careless  with  the  com- 
pany's tools  and  machines.  The  only  satisfactory  reason 
for  the  emplojmient  of  collective  contract  work  seems  to 


220  Organization  and  Management 

be  that  organized  labor  will  submit  to  a  brisk  pace  when 
imposed  upon  its  members  by  a  contractor  who  is  himself 
a  member  of  the  organization. 

It  is  quite  apparent  that  fear  of  cutting  the  contract 
price  will  operate  with  the  contractor  in  just  the  same 
way  as  it  does  wdth  the  workman  under  the  traditional 
piece-rate  system.  The  contractor  will  feel  that,  if  the 
management  thinks  he  is  making  too  much  money,  it  will 
not  give  him  the  same  price  on  the  next  contract ;  hence, 
he  dare  not  turn  the  work  out  at  a  rate  so  rapid  as  to 
jdeld  an  exceptional  profit. 

Time  Work  with  Efficiency  Records 

As  previously  stated,  the  crudest  type  of  day  work  is 
that  in  which  the  workmen  are  paid  a  uniform  class  rate, 
regardless  of  individual  efficiency.  As  soon  as  w^e  have 
accumulated  data  with  regard  to  standard  elementary 
times,  and  the  correct  total  time  in  which  various  jobs 
should  be  done,  we  can  establish  a  record  for  every  em- 
ploye in  which  the  time  he  took  under  the  day-rate  system 
is  compared  with  the  time  standard  established.  If  the 
total  hours  which  he  spent  on  standardized  work  are  re- 
corded, and  the  sum  of  these  standard  times  is  divided  by 
the  time  which  he  actually  took,  we  shall  get  a  percentage 
which  roughly  approximates  his  efficiency  on  standard- 
ized work.  For  instance,  if  during  a  certain  week  a  man 
has  had  jobs  on  which  time  standards  have  been  estab- 
lished to  the  extent  of  30  hours  of  work  according  to  the 
established  standards,  and  the  time  it  actually  took  him 
to  do  these  jobs  was  40  hours,  then  his  approximate  effi- 
ciency was  1^,  or  75    per  cent. 

If  we  have  accumulated  records  of  this  sort  covering 
the  performance  of  a  number  of  workmen,  we  shall  soon 


Wage  Systems  221 

find  that  we  have  certain  good  workers  who  turn  out 
regularly  from  two  to  three  times  the  quantity  of  work 
done  by  poor  ones.  It  is  immediately  apparent  that  a 
company  can  afford  to  increase  the  efficient  worker's 
rate  gradually  until  it  is  one-third,  or  more,  higher  than 
the  former  average  rate,  simply  for  the  purpose  of  retain- 
ing the  high-grade  man.  At  the  opposite  end  of  the  scale 
the  efficiency  record  will  soon  disclose  what  workers  are 
uniformly  inefficient.  These  should  receive  instructions 
with  a  view  to  bettering  their  efficiency.  If  they  do  not 
show  themselves  willing  to  better  their  efficiency,  they 
should  be  dismissed  with  the  least  possible  delay. 

Under  a  combined  daj^-rate  and  efficiency-promotion 
system  of  this  sort  advances  may  be  made  at  intervals 
of  from  three  to  six  months  in  the  hourly  rate  of  the 
employe  until  he  reaches  the  maximum  rate.  This  system 
will  gradually  attract  the  good  workers  of  a  vicinity  to 
the  establishment,  since  they  know  that  they  will  receive 
good  wages.  The  poor  workers  will  be  rapidly  weeded 
out,  and  the  news  ^\^ll  be  spread  that  poor  workers  are 
not  wanted  in  the  establishment.  The  only  difficulty  in 
connection  with  this  system  is  that,  in  case  organized  la- 
bor is  employed,  an  amicable  agreement  should  be  made 
at  the  outset  whereby  the  organization  will  agree  not  to 
demand  that  the  maximum  rate  be  paid  all  of  its  members, 
and  that  they  mil  countenance  the  discharge  of  members 
whose  efficiency  records  show  them  to  be  unfit. 

Halsey  Premium  System 

In  the  premium  system  as  devised  by  Mr.  F.  A.  Halsey 
the  workman  receives  his  hourly  rate,  and  in  addition  to 
this  receives  extra  pay  every  time  he  does  the  work  in  less 


222 


Organization  and  Management 


time  than  the  time  standard.  The  time  standard  origi- 
nally employed  by  Mr.  Halsey  was  the  average  of  the 
records  of  previous  performance.  At  the  present  time, 
however,  the  time  standard  is  usually  taken  from  40  to 
60  per  cent  higher  than  the  time  in  which  a  skilled  work- 
man can  do  the  work  under  correct  conditions,  such  time 
standards  having  been  established  by  a  scientific  motion 
and  time  study  made  during  demonstrations  by  a  skilled 


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Fig.  69. — Chart  Illustrating  How  Pay  Per  Piece  is  not  Reduced  if  More 

than  Specified  Time  is  Consumed  and  How  Pay  Increases  as  Time 

is  Eeduced  under  the  Halsey  Premium  System 

mechanic.  The  method  of  figuring  wages  under  the  Hal- 
sey premium  system  is  expressed  in  the  following  equa- 
tion: 

Wages  =  the  time  taken  X  the  hourly  rate  +  the  time  saved  X  a 
fraction  of  the  hourly  rate 


The  customary  fraction  of  the  hourly  rate  is  50  per 
cent.  Prior  to  the  general  acceptance  and  introduction  of 
accurate  motion  and  time  study  made  on  demonstration 


Wage  Systems 


223 


by  skilled  mechanics  as  a  basis  of  time  standards,  vari- 
ous systems  were  used  which  sought  to  establish  a  dimin- 
ishing premium  scale  as  the  time  was  reduced  below  the 
time  standard.  These  systems  sought  to  provide  a  sort 
of  insurance  for  employers  who  made  mistakes  in  setting 
their  time  standards  too  high. 

The  50  per  cent  gain-sharing  rate  is  not  advocated  by 
Halsey  as  absolutely  the  only  rate  to  use.  In  fact,  he 
recommends  the  use  of  lower  premium  rates  for  certain 
classes  of  work  in  which  the  workman  does  not  have  to 
exert  himself,  or  exercise  unusual  intelligence  or  skill  in 
order  to  earn  a  premium.  As  the  extra  pay  or  premium 
for  time  saved,  he  recommends  the  use  of  varying  per- 
centages of  the  value  of  the  time  saved,  running  from 
fifty  down  to  as  low  as  twenty. 

Some  of  the  results  actually  obtained  under  the  Hal- 
sey Premium  Plan  are  analyzed  in  the  following  table : 


Time 

ALLOWED 

Time 
Taken 

Wages  on 
jou  at  30c  an 

UOTTB 

Premittm 
38  %  %  OF 

THE 

VALtTB  OF 

THE    TIME 

SAVED 

WORK- 
MAN'S 
EARNINGS 
PER    HOUR 

TOT^L 

LABOR 

COST     OF 

JOB 

10  hours 

10  hours 

$3.00 

0 

.30 

$3.00 

10  hours 

9  hours 

2.70 

.10 

.311 

2.80 

10  hours 

8  hours 

2.40 

.20 

.325 

2.60 

10  hours 

7  hours 

2.10 

.30 

.343 

2.40 

10  hours 

6  hours 

1.80 

.40 

.366 

2.20 

10  hours 

5  hours 

1.50 

.50 

.40 

2.00 

The  field  for  premium  systems  is  in  such  manufactur- 
ing establishments  as  make  a  line  of  various  styles  and 
sizes  of  product,  in  which  part  of  the  work  is  repetitious 
and  part  of  it  interchangeable,  while  a  large  portion  rep- 
resents parts  which  are  made  only  once  or  at  long  inter- 
vals. 


224  Organization  and  Management 

The  premium  system  has  the  advantage  that  it  does 
not  set  up  fear  as  an  incentive.  Absolute  guarantee 
should  be  made  of  the  principles  of  time  standards  under 
the  premium  rate  system,  so  long  as  methods,  tools,  and 
machines  are  not  changed. 

The  premium  system,  like  all  other  systems  which  are 
different  from  day  rate,  is  in  many  localities  opposed  by 
local  labor  unions.  Some  labor  unions  thoroughly  dis- 
credit the  practice  of  more  than  one  rate  of  wages.  Tes- 
timony before  the  Industrial  Commission  indicates  that 
in  some  localities,  if  a  man  is  known  to  accept  pay  beyond 
the  regular  rate,  he  is  said  by  his  fellow  union  members 
to  be  taking  blood-money,  and  is  despised  as  much  as  a 
man  who  works  below  the  standard  rate.  Figure  69 
shows  how  normal  wage  is  paid  if  time  per  piece  is  not 
reduced,  and  how  pay  increases  as  time  is  reduced  under 
the  Halsey  Premium  System. 

Rowan  Premium  System 

This  is  a  modification  of  Halsey 's  premium  system, 
devised  by  Mr.  James  Rowan,  a  member  of  a  well-known 
Scotch  engine  establishment.  Time  limits  are  established 
as  under  the  Halsey  system.  The  amount  to  be  added,  in 
case  the  time  limit  is  reduced,  is  figured  in  the  following 
manner:  The  premium  equals  the  money  value  of  the 
time  actually  taken  to  do  the  job  multiplied  by  the  time 
saved  and  divided  by  the  time  limit.  For  example,  if  the 
time  limit  is  10  hours  for  a  piece  of  work  on  which  is 
employed  a  man  receiving  30  cents  an  hour,  and  he  does 
the  work  in  8  hours,  then  his  pay  will  be  8  times  30,  or 
$2.40,  for  his  regular  time;  the  premium  to  be  added 
will  be  ?5?^o,  or  48  cents. 

10     ' 


Wage  Systems 


225 


Further  results  of  the  application  of  the  Rowan  Pre- 
mium System  are  exemplified  in  the  following  table : 


TtMK 
ALLOWED 


Time 

TAKEN 


Wages  on 
JOB  at  30o  an 

HOTTK 


Pke- 

MIUM 

Money 
value  X 

FEB  CENT 
OV  TIME 
SAVED 


Work- 
man's 
earnings 

PER  nODR 


Total 
labor 
COST  of 

JOB 


10  hours 
10  hours 
10  hours 
10  hours 
10  hours 
10  hours 


10  hours 
9  hours 
8  hours 
7  hours 
6  hours 
5  hours 


$3.00 
2.70 
2.40 
2.10 
1.80 
1.50 


0 

.30 

.27 

.33 

.48 

.36 

.63 

.39 

.72 

.42 

.75 

.45 

$3.00 
2.97 
2.88 
2.73 
2.52 
2.25 


An  investigation  of  the  accompanying  table  and  curve, 
as  well  as  the  trying  out  of  actual  figures  in  the  formula 
given,  will  show  that,  no  matter  how  far  the  time  is  re- 
duced, the  premium  mil  never  be  quite  as  great  as  the 
regular  pay  at  a  given  time,  so  that  the  man  can  never 
double  his  wages  under  this  system. 

The  Rowan  system  is  used  to  a  considerable  extent  in 
Great  Britain.  Objections  have  been  made  to  it  on  the 
ground  that  there  ought  to  be  no  limit  to  the  amount  of 
premium  or  bonus  which  a  man  can  earn.  In  reply  to 
this  the  statement  is  made  that  the  management  may  have 
a  very  definite  idea  of  the  shortest  time  in  which  it  is 
desirable  to  do  a  piece  of  work  from  considerations  of 
accuracy,  wear  of  machinery,  and  fatigue  affecting  the 
man.  Another  objection  to  the  system  is  that  it  requires 
a  higher  grade  of  clerical  help  to  figure  out  the  premium 
than  is  needed  with  the  Halsey  system,  also  that  figuring 
the  premium  is  too  complicated  an  affair  for  the  work- 
man, and  that  he  will  therefore  become  dissatisfied. 
Where  the  clerical  labor  and  the  mechanics  are  both  of  a. 
high  order  of  intelligence,  these  last  objections  will  not 


226 


Organization  and  Management 


hold  good.  There  are  conditions,  however,  under  which 
they  will  be  valid.  Figure  70  shows  how  pay  remains  the 
same  if  the  time  is  not  reduced,  and  how  it  increases  as 
the  time  is  reduced  under  the  Rowan  system. 

Gantt  Bonus  System 

In  this  system  time  standards  are  established,  but  the 
workman  is  guaranteed  a  certain  hourly  rate  regardless 
of  his  ejfficiency.    K  he  does  the  work  in  the  standard  time 


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Fig.  70. — Chart  Illustrating  How  Pay  Remains  the  Same  if  the  Time  is 

Not  Reduced  and  How  it  Increases  as  the  Time  is  Reduced  under 

the  Rowan  System 


he  receives  a  bonus,  usually  from  20  per  cent  to  60  per 
cent,  depending  on  the  nature  of  the  work. 

If  he  does  the  work  in  less  than  the  standard  time  he 
receives  the  time  rate  for  the  standard  time  plus  the 
same  bonus.  In  other  words,  the  system  is  virtually  a 
time  rate  for  the  man  who  does  the  work  in  more  than 
standard  time,  and  it  is  a  piece  rate  for  those  who  reach  or 
better  the  standard. 


Wage  Systems 


227 


Suppose,  for  example,  that  the  standard  time  for  a 
given  job  of  work  is  eight  hours,  the  rate  of  pay  is  40 
cents  per  hour,  and  the  bonus  is  30  per  cent.  If  the  man 
takes  ten  hours  to  do  the  work  he  gets  ten  times  40  cents, 
or  $4.00  for  the  Job. 

If  he  does  the  work  in  eight  hours, he  gets  eight  times 
40  cents,  or  $3.20  plus  30  per  cent  on  eight  hours — ^which 
is  96  cents.  This  makes  his  earnings  $4.16  for  eight  hours, 
and  his  hourly  rate  is  52  cents.  If  it  takes  him  six  hours 
to  do  the  work,  he  receives  $2.40  for  the  time  at  work, 
plus  96  cents  as  a  bonus,  making  his  total  wage  $3.36  and 
his  hourly  wage  56  cents  as  contrasted  to  40  cents  in  the 
first  instance  and  52  cents  in  the  second. 


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Fig.  71. — Chart  Illustrating  How  Day  Rate  is  Paid  Irrespective  of  Output 

and  How  Pay   Increases  as   Time  is  Reduced  under  the  Gantt 

Bonus  System 

while  he  is  learning  the  job,  and  then  to  pay  him  a 
sufficiently  large  bonus  to  keep  him  working  at  his  highest 
rate  of  efficiency. 

In  addition  to  the  bonus  paid  the  workmen,  a  bonus  is 
also  frequently  paid  to  the  foremen.  This  foreman's  bonus 
varies  with  the  number  of  workmen  in  his  gang  who  earn 


228 


Organization  and  Management 


their  bonus;  i.  e.,  it  is  larger  if  all  the  men  in  the  gang 
succeed  in  earning  their  bonus  than  if  only  some  of  them 
are  successful. 

For  instance,  assuming  that  the  foreman  had  ten  men 
under  him,  he  get  would  10  cents  per  man  bonus,  or  $1.00 
per  day,  if  nine  of  his  men  made  their  bonus.  If,  how- 
ever, all  his  men  made  their  bonus,  he  would  receive  16 
cents  per  man,  or  $1.50.  This  system  applies  the  differ- 
ential piece  rate  for  rewarding  the  foreman.     There  is  an 


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PiQ.  72. — Chart  Illustrating  How  Pay  on  the  In  dividual -Job  Bonus  System 
Increases  as  the  Time  ia  Reduced 


inducement  for  him  to  secure  the  highest  efficiency  from 
every  workman. 

The  particular  field  for  this  bonus  system  would  be  in 
industries  in  which  the  standards  had  become  pretty  well 
established  under  the  original  Gantt  bonus  system. 

It  will  be  noted  that  the  individual  job  bonus  system 
recognizes  100  per  cent  efficiency  on  the  individual  job, 
but  does  not  reward  a  man  for  his  effort,  in  case  he  does 


Wage  Systems  229 

not  attain  100  per  cent  efficiency.  The  payment  of  bonus 
on  individual  jobs  demands  a  high  grade  of  accuracy  and 
integrity  on  the  part  of  the  person  keeping  the  time  rec- 
ord, so  as  to  prevent  the  robbing  of  time  from  one  job 
and  putting  it  on  another  in  order  to  favor  the  working 
men.  Moreover,  the  most  desirable  employe  is  not  the 
one  who  makes  gains  by  occasional  spurts,  but  one  who 
averages  high  in  efficiency.  Under  the  individual- job 
bonus  system  there  is  no  incentive  to  maintaining  a  uni- 
formly high  efficiency  on  all  jobs.  Figure  72  shows  how 
pay  on  indiAddual-job  bonus  system  increases  as  time  is 
reduced.  The  data  used  are  from  bonus  charts  prepared 
by  Frederick  W.  Parkhurst. 

DiEMER  Combined  Bonus  and  PREMniM  System 

The  writer  introduced  in  1905  at  the  Atlas  Engine 
Works  at  Indianapolis  a  system  in  which  the  workmen 
were  paid  a  10  per  cent  increase  of  their  wages  if  they 
reduced  below  past  average  the  time  in  which  the  work 
was  done.  They  were  paid  20  per  cent  of  hourly  wage 
increase  if  the  work  was  done  in  a  specified  standard 
time,  such  standard  time  being  based  on  motion  and  time 
study,  on  demonstration  by  skilled  mechanics,  and  about 
30  per  cent  being  added  to  this  time.  A  further  so-called 
''gain-sharing  bonus"  on  the  Halsey  premium  plan  was 
allowed  if  they  did  the  work  in  less  than  the  specified 
standard  time.  In  addition  to  the  bonus  wages  paid,  a 
record  was  kept  of  every  man's  percentage  of  success 
during  each  pay  period,  and  each  man's  percentage  of 
success  under  the  system  was  made  the  basis  of  promo- 
tion in  his  hourly  rate. 

The  field  for  this  system  is  the  same  as  that  for  the 
bonus  system.  Its  particular  advantage  lies  in  the  fact 
that,  recognizing  the  tendency  of  men  to  work  in  spurts 


230 


Organization  and  Management 


on  certain  jobs,  it  offers  inducements  to  men  who  are 
faithful  and  steady  in  their  efforts  to  do  every  job  in 
the  standard  time.  This  system  was  described  in  the 
Engineering  Magazine  for  August,  1905.  Figure  73 
shows  how  with  guaranteed  day  rate  the  pay  increases 
as  time  is  reduced  under  this  system. 

Efficiency  System 

In  this  system  a  standard  time  is  established  for  each 
job.     During  each  pay  period  a  record  is  made  of  the 


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Fig.  73._Chart   Illustrating   How   with   a   Guaranteed   Day   Eate   the   Pay 

Increases  as  the  Time  is   Reduced  under   the  Diemer   Combined 

Bonus  and  Premium  System 

number  of  hours  a  man  worked  on  the  jobs  on  which  time 
standards  were  estabhshed.  Then  the  total  hours  in 
which  he  did  these  standard  time  jobs  is  divided  into  the 
total  sum  of  the  time  standards.  For  example,  if  the  sum 
of  the  standard  times  in  a  given  pay  period  aggregates 
210  hours,  and  the  man  took  240  hours  on  these  jobs, 
then  his  efficiency  would  be  |^.  or  87.5  per  cent. 


Wage  Systems  231 

Mr.  Harrington  Emerson  devised  a  sliding-scale  for 
determining  the  bonus  to  be  paid  under  the  efficiency 
system.    This  scale  is  as  follows : 

PEB    CENT  BONUS  AS 

EFFIOIEHOY  KaACTION    OF    WAGES 

66.0 0001 

68.0 0004 

70.0 0020 

72.0 0055 

74.0 0101 

76.0 0161 

78.0 0239 

80.0 0330 

82.0 0435 

84.0 0555 

86.0 0693 

88.0 0840 

90.0 1000 

Above  90  per  cent  efficiency  add  the  percentage  above 
90  to  10  per  cent  and  the  sum  is  the  fraction  of  the  wages 
to  be  paid  as  bonus.  Figure  74  shows  how  with 
guaranteed  day  rate  the  Emerson  system  rewards  for 
increased  efficiency.  Figure  75  tabulates  methods  of  cal- 
culating the  data  from  which  the  preceding  curves  were 
plotted. 

Selecting  and  Intkoducing  Wage  Systems 

The  type  of  wage  system  to  be  introduced  will  depend 
not  only  on  the  extent  of  standardization,  but  also  on 
whether  the  workmen  are  of  a  high  or  low  grade  of 
intelligence,  and  whether  or  not  they  are  under  the 
domination  of  strict  union  regulations  in  regard  to 
wages.  A  good  many  writers  introducing  wage  system 
suggest  the  Halsey  premium  system  as  a  transitional 
plan  to  be  used  where  time  studies  have  not  been  intro- 
duced.    While  it  is  true  that  the  premium  plan  as  in- 


232 


Organization  and  Management 


stalled  in  the  early  90 's  made  use  of  the  past  averages 
of  time  performance,  as  shown  by  time  tickets  and  cost 
records,  we  must  bear  in  mind  that  Mr.  Taylor's  first 
paper  describing  time  study  methods  was  presented  be- 
fore the  American  Society  of  Mechanical  Engineers  in 
1895. 

Systematic  time  study,  in  accordance  Avith  Mr.  Tay- 
lor's recommendations,  was  taken  up  by  a  great  many 


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Increases   as   Efficiency   Increases   under   the   Emerson   Efficiency 

System 


competent  engineers  and  shop  managers  outside  of  the 
circle  of  Mr.  Taylor's  immediate  associates.  Among 
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study  took  the  place  of  past  averages  in  the  late  90 's. 
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naries to  any  successful  wage  system.  Moreover,  they 
also  realized  that  bonus  and  premium  rates  must  be 
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Wage  Systems 


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234  Organization  and  Management 

method,  and  that  an  iron-clad  guarantee  must  be  given 
that  the  rate  once  established  will  not  be  cut,  and  this 
guarantee  must  be  faithfully  lived  up  to.  In  general, 
we  may  state  the  field  of  the  various  systems  as  follows : 

Where  standardization  has  not  been  developed  very 
far,  time  work  with  efficiency  records  is  appropriate. 

Where  standardization  is  under  way,  but  has  not  been 
very  well  developed,  the  premium  system  is  applicable. 

Where  standardization  is  fully  developed,  the  bonus 
system  on  indi\T.dual  jobs,  the  combined  bonus  and  pre- 
mium system,  or  the  efficiency  system  may  be  introduced. 
Various  systems  may  be  introduced  in  the  same  shop. 
At  the  Link  Belt  Engineering  Company,  in  Philadelphia, 
some  of  the  work  is  ordinary  piece  rate,  some  on  differ- 
ential piece  rate,  some  on  premium  rate,  and  some  on 
individual- job  bonus. 


TEST  QUESTIONS 

1.  Into  what  three   general   groups   may  we   classify   wage 
systems? 

2.  What  are  the  disadvantages  of  time  work  1 

3.  How  may  time  work  be  made  most  effective  ? 

4.  What  are  the  objections  to  ordinary  piece  rate  ? 

5.  Describe  the  differential  piece-rate  system. 

6.  Describe  collective  contract  work. 

7.  How  may  time  standards  and  efficiency  records  be  applied 
to  a  time-work  system  ? 

8.  Describe  the  Halsej'  premium  system. 

9.  Describe  the  Rowan  premium  system. 

10.  Describe  the  original  Gantt  bonus  system. 

11.  Describe  the  bonus  system  as  applied  to  individual  jobs. 

12.  Describe  the  Diemer  combined  bonus  and  pi'eraium  sj'stem. 

13.  Describe  the  Emerson  sliding  scale  and  efficiency  system. 


Wage  Systems  235 

14.  Discuss  the  question  of  selecting  the  proper  wage  system 
for  various  conditions. 

15.  What  remedy  would  you  propose  to  do  away  with  "soldier- 
ing" or  loafing? 

16.  In  case  new  equipment  or  new  methods  promote  time  re- 
ductions for  which  the  worker  is  not  responsible,  how  would  you 
endeavor  to  justify  to  his  satisfaction  the  lowering  of  piece  rates 
or  premium  times? 

17.  Under  the  Halsey  and  other  premium  systems  do  you 
think  it  is  fair  that  the  proprietorship  should  retain  half  of  the 
value  of  the  time  saved  by  the  worker?  Give  reasons  for  your 
answer. 

18.  Under  a  day-rate  system  with  efficiency  records,  what 
course  should  be  pursued  with  regard  to  the  men  showing  the 
lowest  efficiency? 

19.  How  would  you  explain  the  attitude  of  organized  labor 
favoring  a  uniform  wage  scale  and  opposing  any  type  of  extra 
compensation  based  on  individual  efficiency? 

20.  What  are  the  preliminary  steps  in  connection  with  organ- 
ization and  system  which  must  be  taken  before  the  wage  question 
can  be  considered? 


CHAPTER  XV 
■welfare  and  betterment  avork 

Aims  of  Welfaee  and  Betterment  Work 

Strength,  both  physical  and  moral,  happiness,  content- 
ment, thrift,  industrial  and  social  intelligence  among 
workers  as  well  as  supervising  forces,  are  the  aims  of 
modern  industrial  welfare  and  betterment  work.  When 
intelligently  undertaken  and  systematically  carried  on, 
such  work  will  result  in  as  marked  an  advantage  to  the 
employer  as  the  result  from  well-organized  planning 
and  standardization.  The  closer  relationship  established 
between  employers  and  employes  develops  interest  and 
enthusiasm  to  such  an  extent  that  increase  in  efficiency, 
as  regards  qualitj^  and  quantity  of  output  and  avoidance 
of  wastes,  more  than  pays  for  the  expenses  connected 
with  welfare  undertakings. 

Naturally  there  will  be  some  failures  from  suspicion 
and  from  ingratitude,  no  matter  how  intelligently  and 
unselfishly  welfare  and  betterment  work  is  undertaken. 
It  is  nevertheless  true  that,  if  a  company  wishes  the 
most  competent  and  intelligent  men,  it  is  essential  to 
provide  the  most  inviting  surroundings  and  conditions, 
since  intelligent  and  thrifty  men  will  naturally  seek  an 
intelligent  and  wholesome  environment  in  which  to  work. 

In  order  to  carry  the  work  as  far  as  possible,  and  at 
the  same  time  avoid  the  charge  that  the  employer  is 
paternalistic,  it  is  necessary  that  the  workmen  them- 

236 


Welfare  Work  237 

selves  carry  on  the  management  of  tlie  work,  the  em- 
ployer furnishing  only  the  suggestions  and  inspiration. 
It  follows  necessarily  that  the  work  cannot  be  hurried. 
If  some  of  the  men  are  opposed  to  certain  results,  or 
scoff  at  them,  it  is  sometimes  best  to  put  them  on  a  com- 
mittee to  carry  out  these  measures,  with  a  diplomatic 
foreman  or  superintendent  on  the  same  committee. 

Activities  Included  Under  Welfaee  and  Betterment 

Work 

The  activities  coming  under  this  general  head  may  be 
grouped  into  those  relating  to: 

1.  Safety  and  accident  prevention. 

2.  Education. 

3.  Rest  periods  and  luncheons. 

4.  Social. 

5.  Medical. 

6.  Physical  training. 

7.  Suggestions. 

8.  Benefit  societies. 

Organization  for  Welfare  and  Betterment  Work 

The  greatest  success  has  been  achieved  where  ques- 
tions of  safety,  welfare,  and  betterment  have  been  re- 
ferred to  committees  composed  not  only  of  engineers 
and  higher  officials,  but  of  workmen  and  foremen  and 
even  outside  persons.  In  so  far  as  certain  features  of 
safety  problems  are  mechanical,  certain  uniform  stand- 
ards can  be  adopted,  but  even  the  safety  problem  is 
only  to  a  small  degree  mechanical. 

As  the  problem  is  very  largely  a  human  one,  condi- 
tions will  be  Avidely  different.  The  manufacturer  who 
copies  what  others  have  done  in  safety,  welfare,  and 
betterment  work  w^ill  find  that  he  is  attacking  his  own 


238  Organization  and  Management 

problem  in  no  more  satisfactory  a  manner  than  if  he 
were  to  adopt  the  factory  accounting  forms  of  some 
other  establishment.  He  may  get  some  useful  sug- 
gestions from  the  work  done  by  others,  but  he  will  have 
to  apply  his  own  initiative  (and  that  of  such  members 
of  his  force  as  show  ability  in  this  direction)  towards 
developing  methods  suitable  to  his  particular  problems. 

The  ordinary  form  of  organization  is  to  have  a  per- 
manent committee,  consisting  of  a  chairman,  who  is  gen- 
erally selected  from  the  engineering  or  works  manage- 
ment -division,  with  two  or  three  other  members,  usually 
of  foreman's  rank.  This  committee  should  hold  monthly 
meetings  regularly  and  such  special  meetings  as  may  be 
necessarj^  The  duty  of  this  committee  is  to  pass  upon 
all  recommendations  and  make  such  inspections  as  are 
necessary  in  coniiection  with  recommendations. 

In  addition  to  the  permanent  committee,  workmen 
committees  are  appointed.  These  men  are  chosen 
among  the  workmen  holding  lower  rank  than  assistant 
foreman.  In  some  industries  good  results  have  been 
obtained  by  having  these  men  serve  a  month,  and  ap- 
pointing them  fifteen  days  apart,  so  that  there  will 
always  be  a  man  of  some  experience  with  a  new  man  on 
a  committee.  These  men  are  instructed  by  the  chairman 
of  the  permanent  committee.  If  on  safety  work,  they 
make  inspections  once  a  week  and  turn  in  their  reports 
to  the  permanent  committee,  which  acts  on  their  recom- 
mendations either  favorably  or  adversely.  The  aim  of 
having  the  workmen's  committees  is  to  secure  as  wide- 
spread an  interest  in  the  work  as  possible. 

Besides  the  permanent  committee  and  workmen  com- 
mittees, in  case  a  plant  is  large  enough,  a  permanent 
safety,  welfare,  and  betterment  man  may  be  employed 
to  give  his  entire  time  to  supervising  the  work. 


Welfare  Work  239 

The  organization  for  welfare  work  at  the  Cadbury 
Works,  at  Bournonville,  one  of  the  best  examples  in  the 
world,  of  successful  work  of  this  sort,  is  as  follows: 

All  welfare  and  betterment  work  is  under  the  jurisdic- 
tion of  a  works  committee.  There  are  four  divisions  of 
this  committee,  namely: 

1.  The  works  education  committee. 

2.  The  men's  works  committee. 

3.  The  girls'  works  committee. 

4.  Suggestion  committee. 

The  general  committee  meets  on  Monday  mornings. 
There  are  sub-committees  of  the  men's  works  committee 
dealing  respectively  with  holidays,  accidents,  gardens, 
benefits,  recreation  grounds  and  buildings.  The  girls' 
works  committee  deals  with  promotions  to  staff,  exami- 
nations, plans  of  additional  buildings  and  extensions, 
investigates  complaints  and  accidents,  maintains  fire 
drills  in  the  girls'  departments,  and  makes  periodical 
inspections  of  dressing-rooms,  dining-rooms,  kitchen, 
baths,  gymnasiums,  store-rooms,  etc.  They  also  period- 
ically inspect  the  girls'  recreation  grounds. 

Sapety,  Accident  and  Fiee  Prevention 

The  installation  of  proper  accident  and  fire  preven- 
tion apparatus  is  beneficial  from  several  points  of  view. 
It  does  away  with  loss  to  the  proprietorship  in  the  way 
of  actual  fire  damage  and  interference  with  business  in 
case  of  fire.  It  prevents  many  losses  due  to  compensation 
for  unavoidable  accidents  and  injuries,  as  well  as  the  liti- 
gation that  arises  out  of  them.  But  equally  important  is 
the  fact  that  it  tends  to  do  away  with  fear  on  the  part  of 
the  employes,  develops  a  kindly  attitude,  and  thus  as- 
sists to  increase  output. 


240  Organization  and  Management 

In  factories  it  is  necessary  that  sheet  metal  or  cast 
aluminum  guards,  so  constructed  that  they  can  be  easily 
removed,  be  placed  over  all  exposed  gears.  Proper 
screening,  preferably  made  of  expanded  metal  somewhat 
heavier  than  wire  mesh  and  supported  on  pipe  frames, 
should  be  placed  around  all  moving  belts  to  a  height  of 
414  feet  from  the  lloor  level.  Overhead  belts  should 
have  guards  underneath  them,  so  that  in  case  of  a  break 
they  will  not  whip  around. 

Punch  presses  should  be  equipped  in  such  a  manner 
that  they  will  not  operate  until  the  workman's  hand  is 
withdrawn  from  a  position  which  would  endanger  him. 
Guards  should  be  provided  over  all  saws  or  cutters  in 
woodworking  machines,  and  substantial  fences  should  be 
furnished  for  operators  at  band-saws  and  similar  ma- 
chines where  the  workman  is  exposed  to  danger  in  spite 
of  the  best  modern  safety  devices.  This  ience  is  to  pre- 
vent the  workmen  from  being  jostled  by  anybody  else. 

Dust  exhaust  systems  must  be  provided  in  all  wood- 
working shops,  around  grindstones,  emery-wheels,  buf- 
fing-wheels, and  polishiug-wheels,  so  as  to  carry  off  dust 
and  small  particles,  which  are  injurious  to  the  health  of 
workers. 

Detailed  methods  for  safeguarding  practically  every 
kind  of  machinery  are  furnished  at  the  present  time  by 
the  various  compensation  insurance  companies,  and  by 
the  bureaus  of  labor,  industry,  and  compensation  estab- 
lished as  state  departments  in  a  number  of  states. 

As  regards  fire  prevention,  the  principal  remedial 
steps  to  be  taken  are: 

1.  The  providing  of  ample  fire  escapes. 

2.  Automatic  sprinklers  with  an  abundant  supply  of 
water  independent  of  the  ordinary  system. 


Welfare  Work  241 

3.  Chemical  extinguishers. 

4.  Fire  hose  at  sufficiently  close  intervals  to  be  effect- 
ive. 

5.  Water-buckets  and  sand-buckets  kept  filled  and 
available  for  immediate  use. 

6.  Metal  cans  with  self-closing  lids  to  receive  oily 
waste  and  any  other  inflammable  material. 

7.  Fire  drills  among  employes. 

8.  Shop  fire  companies. 

The  various  fire  underwriters'  bureaus  have  available 
detailed  descriptions  of  fire  prevention  apparatus  and 
building  specifications  for  various  kinds  of  industrial 
establishments,  which  should  be  carefully  consulted  by 
committees  having  this  subject  in  charge.  Figures  76, 
77,  78,  and  79  illustrate  typical  modem  machine  safe- 
guards. 

Under  the  existing  apprentice  systems  at  the  General 
Electric  and  Westinghouse  companies,  it  costs  those  cor- 
porations about  $1,000  over  and  above  the  value  of  the 
productive  work  of  the  apprentice  to  make  him  a  valu- 
able worker.  If  an  accident  occurs  to  this  apprentice 
the  company  loses,  therefore,  an  investment  of  $1,000,  in 
addition  to  any  liability  for  damages.  Moreover,  they 
must  start  over  again,  expending  not  only  the  money 
but  the  time  also  in  training  another  apprentice. 

For  the  ordinary  factory  without  safeguards  the  aver- 
age rate  of  insurance  for  compensation  for  accidents  is 
about  $2.50  per  $1,000  of  pay-roll.  With  proper  safe- 
guards this  rate  can  be  cut  in  half.  The  most  hazardous 
industries  in  order  of  greatest  number  of  accidents  hap- 
pening per  annum  are  as  follows: 

1.  Metal  mining. 

2.  Coal  mining. 


242  Organization  and  Management 

3.  Fisheries. 

4.  Navigation. 

5.  Railroads. 

6.  Electricians. 

7.  Building  construction. 

8.  Street  railroads. 

9.  Telephone  and  telegraph  men. 
10.  General  manufacturing. 

The  most  common  causes  of  accidents  of  all  sorts  in 
all  of  the  above  industries  are  as  follows : 

1.  Hand  tools  and  hand  apparatus. 

2.  Objects  falling  from  piles. 

3.  Hoisting  and  moving  objects. 

4.  Power-driven  saws. 

As  indicating  the  effect  of  proper  illumination  in  pre- 
venting accidents  it  is  interesting  to  know  that  the  num- 
ber of  industrial  accidents  increases  rapidly  as  the  days 
shorten.  By  far  the  highest  number  of  accidents  occur 
in  the  middle  of  December,  and  by  far  the  smallest  num- 
ber in  the  middle  of  June. 

One  must  not  expect  the  complete  elimination  of  acci- 
dents in  the  first  year  of  installing  safeguards  and  or- 
ganizing for  safety  work.  However,  in  the  Pennsylvania 
Railroad  Company  the  number  of  accidents  was  reduced 
to  63  per  cent  of  what  they  had  been  prior  to  safety  or- 
ganization at  the  end  of  one  year  in  a  shop  group  em- 
ploying 33,000  men.  The  Cadillac  Motor  Car  Company 
reports  a  reduction  of  64  per  cent  in  the  number  of  acci- 
dents at  the  close  of  its  first  year's  safety  organization  in 
a  shop  employing  about  3,000  men.  The  Pullman  Com- 
pany gathered  statistics  as  to  the  time  lost  by  reason  of 
accidents  and  found  that  at  the  end  of  one  year's  safety 


Fig,   76. — Transfer  Table,   Motor   Gears   Uncovered 
U.  S.  Steel  Corporation 


Fig.  77. — Transfer  Table,  Motor  Gears  Covered 
U.  S.  Steel  Corporation 


Fig.   78.— :Metliod  of  Guarding  a  Mill  Motor 
U.   S.   Stpcl   Corporation 


Fig.  79. — Pig-iron  Trestle  Shield  to  I'reveut  Flying  Chips  from  Pig  Iron 

Injuring  Workmen 

U.  S.  Steel  Corporation 


Fig.   80. — Gardens — American  Bridge  Company,  Amluiilye,   I'a. 

Land  is  owned  l).v  the  American  liridge  ('cimpany.  laid  out  in  plots  and  allotted 

to    their    employes    for    raising    .garden    truck.      Aljout    sixteen 

acres    are    under    cultivation    by    tlicm. 


Fig.  81. — Bird's-Eye  View  of  Town  of   Marguerite 


Fi(i.  82. — Group  of  Slavish  Laborers  Who  are  Stockholders 
Clairton  Stool  Works,  Carnegie  Steel  Company 


Fig.   83. — Swimming  Pool — Leisenring   No.   1   Mines 
II.  C.  Frick  Coke  Company 


I'll;.    ^4. — L'l;iygrouni|s,    ,\;itioii;il   Tuhe   (J(iiii|i;iiiy 


Fig.  85. — Playgrounds,  A'atioual  Tube  Company 


I 


Fig.  86. — Photograiih  Showing  the  Location  of  Column  Ventilators  at  the 

Ford  ]\Iotor  Works 

Washed  and  humidified  air  under  pressure  enters  through  the  openings  in  the 

columns. 


Fig.  87. — Emergency  Hospital,  Coutiueutal  Works,  National  Tube  Company 


Welfare  Work  243 

organization  they  reduced  the  average  lost  time  per  em- 
ploye, by  reason  of  accidents,  14  minutes  per  year — from 
48  minutes  to  34. 

Educational  Activities 

These  will  include  instruction  in  trades  and  processes 
of  the  industry,  technical  and  scientific  training  relating 
to  the  industry,  business  and  accounting,  principles  of 
economics,  sociologj'',  and  citizenship.  Where  the  estab- 
lishment is  large  enough  to  introduce  a  corporation 
school  of  its  own,  information  as  to  organizing  and 
carrjT.ng  on  such  a  school  can  be  obtained  from  the  Pro- 
ceedings of  the  National  Association  of  Corporation 
Schools,  in  regard  to  which  Mr.  C.  R.  Dooley,  of  the 
Westinghouse  Electric  &  Manufacturing  Company,  East 
Pittsburg,  Pa.,  or  the  Secretary,  Irving  Place  and  Fif- 
teenth Street,  New  York,  can  give  information. 

Local  school  superintendents  in  industrial  centers  and 
state  departments  of  education  in  many  states  have  avail- 
able information  as  to  ho^v  to  organize  vocational,  con- 
tinuation schools  and  night  schools.  Where  a  business 
is  not  large  enough  to  justify  local  corporation  schools, 
general  classes  can  be  organized.  In  some  states  the 
state  will  defray  a  part  of  the  expenses  of  conducting 
such  schools. 

Even  a  small  industry  will  find  it  desirable,  however, 
to  supplement  the  work  of  such  general  schools  by  spe- 
cial training  for  the  company's  own  work.  The  sim- 
plest beginning  is  a  series  of  lectures  by  members  of 
the  sales  and  engineering  staff.  After  these  members 
have  lectured,  it  is  usually  possible  to  persuade  the  su- 
perintendent and  some  of  the  foremen  to  take  part  in 
the  lectures.  Members  of  the  sales  departments  of  com- 
panies which  supply  machinery  and  material  to  the  in- 


244  Organization  and  Management 

dustry  may  also  be  called  in  as  well  as  local  factory 
and  insurance  inspectors.  The  most  effective  results  are 
naturally  obtained  through  the  training  of  the  appren- 
tices, who  obtain  thus  at  an  early  age  an  unbiased  and 
intelligent  industrial  and  economic  attitude  in  conse- 
quence of  their  training  in  the  apprentice  school. 
Among  other  educational  activities  are  the  small  shop 
or  traveling  libraries  adapted  to  industrial  needs. 

The  co-operation  of  local  library  and  state  traveling 
library  officials  can  be  secured,  and  in  some  cases  they 
will  provide  a  speaker  to  accompany  the  books  to  the 
shop  the  first  time  and  talk  on  the  value  of  good  books  and 
reading.  The  home  reading-box  is  a  box  in  which  va- 
rious employes  place  periodicals,  bulletins,  and  books 
which  they  have  read  and  are  willing  to  pass  on  to  others. 
The  classes  for  non-English-speaking  men  and  boys,  also 
illustrated  lectures  to  the  for«ign-bom  on  citizenship, 
history,  commercial  geography,  heroes,  traveling,  etc., 
offer  further  opportunities  for  educational  service  of  an 
extension  nature.  Musical  entertainments  with  explana- 
tory lectures  have  been  introduced  in  a  number  of  in- 
stances. The  Curtis  Publishing  Company,  of  Philadel- 
phia, has  from  time  to  time  secured  the  co-operation  of 
some  of  the  most  prominent  musicians  and  opera  singers 
in  the  world  in  this  connection. 

Rest  Periods  and  Luncheons 

Realizing  the  influence  of  pleasant  surroundings  dur- 
ing meals  on  the  digestion  and  temperament  of  em- 
ployes, an  increasing  number  of  industries  is  providing 
attractive  luncheon-rooms  instead  of  compelling  em- 
ployes to  eat  in  alleys  or  around  their  machines  and 
work-benches.  Where  no  luncheon  service  is  provided, 
tables  can  be  furnished  in  a  well-lighted  room  decorated 


Welfare  Work  245 

with  a  few  plants  and  pictures.  Arrangements  can  be 
made  for  warming  the  soup,  coffee,  and  tea  brought  by 
the  men. 

Naturally,  the  next  development  of  the  luncheon-room 
would  be  the  pro\dding  of  hygienic  lunches  designed  to 
give  the  greatest  nutritive  value  combined  with  palata- 
bility  and  low  cost.  Indigestion  due  to  unbalanced  noon 
lunch  is  pretty  nearly  a  universal  affliction  together 
vnth  lack  of  nourishment  ascribable  to  the  omission  of 
certain  essential  food  factors. 

A  phonograph  will  provide  recreation  after  luncheon, 
while  a  reading  or  rest  room  will  prove  a  welcome  addi- 
tion, especially  for  women  workers.  A  system  of  rest 
periods  of  15  or  20  minutes'  duration  in  the  middle  of 
the  forenoon  and  afternoon  has  been  found  to  pay  for 
itself  in  many  industries. 

Social.  Activities 

Receptions  and  socials  in  social  centers  such  as 
schoolhouses  near  the  shop  can  be  conducted  under  the 
auspices  of  a  committee  of  employes  who  will  arrange 
a  program  and  use  as  much  of  their  own  talent  as  pos- 
sible. Such  occasional  receptions,  together  with  weekly 
musical  entertainments  or  illustrated  lectures,  will  help 
counteract  the  ill  effects  of  saloons  and  commercial  enter- 
prises. ** Smokers"  for  the  men,  dances  for  the  young 
women  and  their  friends,  and  the  celebration  of  national 
holidays  are  among  the  social  activities  which  have  been 
successfully  carried  out. 

In  order  to  increase  interest  in  the  home,  prizes  may 
be  offered  for  the  best  back-yard,  the  best  vegetable- 
garden,  the  best  flower-gardens,  and  the  best  window  or 
porch  boxes  of  flowers.  There  may  also  be  competitions 
in  cooking,  baking,  and  dressmaking  under  the  auspices 


246  Organization  and  Management 

of  social  clubs,  to  the  maintenance  of  which  the  company 
will  contribute.  Figures  80  to  85,  inclusive,  illustrate 
social-welfare  projects. 

Medical  and  Hygienic  Activities 

Matters  of  sanitation,  ventilation,  and  light  have 
already  been  considered  in  connection  with  the  original 
lay-out  of  the  plant.  Figure  86  shows  the  system  of  fur- 
nishing pure  air  employed  at  the  Ford  shops.  It  is  nec- 
essary, however,  that  the  employes  be  instructed  in  the 
principles  of  controlling  these  matters,  in  order  that  they 
may  not  interfere  with  the  carrying  out  of  the  intentions 
of  the  management  in  the  shop,  and  that  they  may  also 
apply  these  principles  in  their  homes. 

The  employment  of  visiting  nurses  is  a  sei*vice  w^hich 
can  well  be  undertaken  by  a  number  of  industries  co- 
operating. Lectures  on  sanitation,  hygiene,  first-aid  to 
the  injured,  and  sex  education,  the  providing  of  a  com- 
pany physician  who  will  make  a  medical  examination  of 
all  applicants  for  work  as  well  as  a  periodic  examina- 
tion of  all  emplo5^es,  and  who  acts  as  the  family  physician 
of  members  of  the  benefit  society,  are  all  activities  which 
come  under  this  head.  Figure  87  shows  a  well-equipped 
emergency  hospital. 

Physical  Training 

Nearly  all  normal  persons  take  pleasure  in  participa- 
ting in  athletic  games  and  competitions.  Baseball  always 
appeals  to  a  considerable  proportion  of  the  men,  and  it 
is  usually  easy  to  organize  one  or  more  teams.  A  com- 
prehensive plan,  however,  will  attempt  to  provide  some 
kind  of  exercise  involving  the  game  idea  to  be  partici- 
pated in  by  practically  every  employe ;  hence,  such  a  plan 
will  include  such  games  as  basketball,  football,  soccer, 


Welfare  Work  247 

and  track  athletics.  An  athletic  committee  can  super- 
vise athletic  sports  at  the  noon  hour  in  the  factory- 
yards  or  grounds,  twiUght  or  Saturday  afternoon  games, 
the  conducting  of  field  day  sports,  and  the  candying  on 
of  calisthenic  exercises  during  the  morning,  afternoon, 
and  rest  recess. 

The  same  committee  or  a  special  committee  can  carry 
on  extension  work,  so  as  to  provide  exercise  for  the 
younger  children  of  employes'  families,  such  as  evening 
games  in  vacant  lots  and  the  promotion  of  playgrounds 
under  the  supervision  of  local  schools  or  park  authori- 
ties. 

In  case  there  are-women  employes,  a  women's  athletic 
and  physical  culture  committee  should  be  appointed.  It 
will  be  found  that  they  will  take  as  active  an  interest  in 
competitive  physical  games  as  do  the  men. 

Excellent  help  can  be  secured  in  this  field  from  local 
Y.  M.  C.  A.  organizations  and  the  Industrial  Department 
of  the  Y.  M.  C.  A.  in  New  York  City. 

Suggestion  System 

The  benefits  to  be  derived  from  a  well-conducted  sug- 
gestion system  have  already  been  pointed  out  several 
times.  Among  them  are  not  only  the  direct  benefit  of  the 
improvements  suggested,  but  encouragement  of  initia- 
tive on  the  part  of  the  employe.  Influencing  him  to  think 
about  things  the  company  can  do  in  better  ways  will 
develop  a  frame  of  mind  and  disposition  worth  collec- 
tively in  many  ways  fully  as  much  as  the  improvements 
actually  installed  as  a  result  of  suggestions. 

The  usual  manner  of  encouraging  suggestions  is  to 
provide  boxes  similar  to  mail-boxes  at  various  points  of 
the  establishment,  marking  them  conspicuously  '*  Sug- 
gestion Box."    Near  the  box  are  placed  pencil  and  pad 


248  Organization  and  Management 

with  carbon  paper,  so  that  the  employe  may  retain  a 
cop5^  of  his  suggestion.  Copies  of  rules  controlling  the 
suggestion  system  are  usually  posted  on  or  adjacent  to 
the  boxes.  The  contents  of  the  boxes  are  collected  at 
regular  intervals  and  submitted  to  committees.  It  is 
usually  desirable  to  classify  the  suggestions  into  va- 
rious groups,  such  as : 

1.  Machinery  and  tools. 

2.  Health,  safety,  and  general  welfare. 

3.  Savings  improvements  in  non-machinery  processes. 

4.  Improvements  in  shop  and  office  systems. 

5.  Suggestions  for  advertising. 

Each  individual  case  will  suggest  a  modification  of  the 
foregoing  grouping. 

In  order  to  pass  intelligently  and  with  judgment  on  the 
suggestions,  it  is  desirable  to  have  each  group  referred 
to  a  committee  especially  competent  to  pass  on  that 
group.  It  is  also  desirable  to  offer  prizes  in  each  group 
as  well  as  additional  prizes  for  the  suggestions  which 
result  in  the  greatest  economies  or  profits  within  six 
months  or  a  year  after  their  adoption. 

Benefit   Societies 

Benefit  societies  have  been  conducted  for  a  good  many 
years  as  local  organizations  in  a  great  many  industrial 
companies.  The  original  aim  of  most  of  these  societies 
was  the  providing  of  insurance  in  case  of  accident,  sick- 
ness, or  death.  Within  recent  years  a  great  many  states 
have  passed  compensation  laws  whereby  the  state,  the 
corporation,  and  employe  share  the  burden  of  compulsory 
insurance  to  provide  for  compensation  in  case  of  acci- 
dental injury  or  death. 


Welfare  Work  249 

Where  such  compensation  laws  exist,  there  still  remain 
many  enterprises  which  can  be  conducted  under  the 
auspices  of  company  benefit  societies.  Among  these 
may  be  mentioned  the  providing  of  insurance  in  case  of 
sickness  on  the  part  of  a  member  or  any  of  his  direct 
family,  and  the  providing  of  vacation  and  Christmas 
funds.  Frequently  the  benefit  association  will  plan  for 
special  rates  for  vacation  trips,  camps,  and  similar  un- 
dertakings. 

The  benefit  association  mil  sometimes  also  act  in  the 
capacity  of  a  savings  bank.  This  does  not  mean  that  the 
association  actually  engages  in  a  banking  business.  It 
simply  encourages  the  making  of  small  deposits  by  pro- 
viding convenient  places  of  deposit  and  by  means  of  no- 
tices on  the  pay  envelopes  calling  the  men's  attention  to 
the  desirability  of  making  deposits,  which  funds  it  turns 
over  to  a  reliable  banking  institution.  The  benefit  or- 
ganization acts  only  as  an  intermediary  and  supple- 
mentary agency,  so  far  as  actual  banking  is  concerned. 

The  usual  amount  of  insurance  consists  of  half-wages 
for  as  long  as  a  year,  if  necessary.  In  case  of  illness 
or  accident,  the  tendency  in  America  is  to  grant  this  in- 
surance only  if  the  accident  occurred  while  on  dut3^ 
British  or  European  compensation  systems  care  for  the 
workmen  of  small  means,  even  if  the  accident  or  dis- 
ability occurred  while  off  duty. 

In  case  of  death,  the  tendency  in  America  seems  to  be 
to  allow  one  year's  wages  for  death  from  sickness  or 
accident  happening  while  off  duty,  and  two  years'  wages 
for  death  due  to  accident  while  on  duty. 

The  ratio  of  the  cost  of  insuranae  to  the  total  pay- 
roll runs  from  ll^  to  2i/^  per  cent.  In  many  cases  the 
management  undertakes  to  bear  a  part  of  this  expense. 
The  Lodge  and  Shipley  Manufacturing  Company  uses 


250  Organization  and  Management 

the  premium  wage  system,  in  which  the  workmen  are 
paid  one  half  of  the  money  value  of  the  time  saved,  and 
distributes  the  other  half  of  this  fund  in  such  a  way  that 
part  of  it  goes  to  the  foremen,  part  to  the  clerical  work 
of  the  premium  system,  and  part  into  tool  and  equipment 
funds,  while  the  remainder  goes  into  the  benefit  and  old- 
age  pension  fund. 


TEST  QUESTIONS 

1.  What  are  the  aims  of  welfare,  betterment,  and  social  serv- 
ice work  in  industry? 

2.  Give  a  list  of  the  activities  ordinarily  included  under  wel- 
fare and  betterment  work. 

3.  How  can  we  best  assign  and  organize  welfare  and  better- 
ment activities  ? 

4.  Discuss  some  of  the  features  to  be  considered  in  connection 
with  safeguarding. 

5.  Discuss  briefly  the  principal  considerations  relating  to  fire 
prevention. 

6.  Discuss  in  general  the  question  of  educational  activities  to 
be  carried  on  by  industries. 

7.  Give  statistical  figures  to  show  that  it  pays  to  undertake 
systematic  safety  work. 

8.  Discuss  the  advantages  of  rest  periods  and  luncheons. 

9.  What  are  the  advantages  of  social  activities  promoted  by 
an  industry  ? 

10.  What  benefits  can  be  obtained  from  medical  and  hygienic 
activities  ? 

11.  Discuss  physical  training  and  athletics  as  a  part  of  welfare 
work. 

12.  What  are  the  main  points  to  be  considered  in  mstalling  a 
suggestion  system? 

13.  Describe  the  organization  and  aims  of  industrial  benefit 
societies. 


Welfare  Work  251 

14.  How  may  we  secure  the  co-operation  of  employes  and 
prevent  suspicion  and  indifference  with  regard  to  welfare  work? 

15.  What  are  the  arguments  in  favor  of  paying  attention  to 
the  home  life  of  employes  ? 

16.  Discuss  the  advantages  to  be  derived  from  publishing  a 
little  house  organ  in  which  are  presented  accounts  of  the  com- 
pany's safety,  welfare,  and  social  activities. 

17.  Discuss  the  relationship  between  poor  illumination  and 
accidents. 

18.  What  sort  of  co-operation  by  local  and  state  school  au- 
thorities would  you  advocate  in  connection  with  educational 
activities  in  industries? 

19.  Where  state  compensation  laws  are  in  existence,  what 
activities  can  be  undertaken  by  local  industrial  benefit  societies? 

20.  What  would  you  consider  the  requirements  of  a  good  in- 
dustrial welfare  supervisor? 


CHAPTER   XVI 

EMPLOYMENT  PROBLEMS 


Desibable  Qualifications  of  Employes 

Some  years  ago  the  author  made  an  extensive  canvass 
of  employers  of  technically  educated  young  men  to  get 
from  them  the  particulars  as  to  the  qualifications  which 
they  considered  desirable.  The  replies  included  a  great 
many  characteristics.  Some  of  these  are  in  direct  con- 
flict with  each  other  and  could  not  exist  in  the  same  man. 
The  complete  list  is  as  follows: 


Address 

Appearance 

Neatness 

Energy 

Vitality 

Speed 

Concentration 

Observation 

Eeason 

Application,  diligence, 

and  industry 
Accuracy 
Punctuality 
Economy 

Order  and  system 
Knowledge 
Intuition 
Culture 
Prudence 

Grit  and  tenacity 
Tact  and  diplomacy 
Judgment  and  fairness 
Eeliability 


Steadiness 

Loyalty 

Integrity 

Thoroughness 

Initiative 

Adaptability 

Optimism 

Cheerfulness 

Eeserve 

Enthusiasm 

Sincerity 

Sympathy 

Self-control 

AbUity  as  detaUist 

Ability  as  generalizer 

Obedience  to 

acknowledged 

authority 
Ability  to  know  men 
Ability  to  get  along 

with  men 
Self-confidence 


252 


Employment  Problems  253 

ADDEESS,  APPEAKANCE,  AND  NEATNESS 

A  man  who  shows  attention  to  his  appearance  in  snch 
matters  as  a  clean-shaven  face,  neatly  trimmed  hair, 
well-brushed  clothes  and  shoes,  and  general  cleanliness, 
is  pretty  sure  to  have  well-developed  self-reepeot.  He 
is  quite  likely  to  be  neat  in  his  work.  If  he  is  of  pleas- 
ing address,  that  is,  agreeable  in  meeting  strangers, 
in  asking  and  answering  questions,  and  not  rough, 
uncouth,  or  boorish,  he  possesses  qualities  which  are  of 
value  in  contact  Avith  other  men.  An  employment  man- 
ager can  easily  determine  these  qualities  by  a  general 
look-over  of  applicants. 

ENEEGY,  VITALITY,  AND  HEALTH 

From  a  philanthropic  or  charitable  standpoint,  the 
insistence  on  these  qualifications  as  necessary  charac- 
teristics of  new  employes  would  debar  many  persons 
who  are  deserving  in  many  ways.  Labor  organizations 
are  already  protesting  against  the  establishment  of 
health  standards  by  various  large  corporations  as  a  pre- 
requisite to  employment.  In  reply  to  this  objection  the 
employers  state  that  the  medical  inspection  is  intended 
to  eliminate  only  such  new  employes  as  would  be  likely 
to  be  a  menace  to  others  by  reason  of  their  having  in- 
fectious or  chronic  diseases,  or  organic  weaknesses  which 
would  make  them  charges  on  the  company's  benefit  socie- 
ties. The  stress  which  is  being  laid  by  employers  on 
these  qualifications  should  serve  to  emphasize  both  the 
importance  of  engaging  in  systematic  physical  training 
and  the  avoidance  of  habits  which  tend  to  destroy  health, 
energy,  and  vitality. 

SPEED 

For  certain  classes  of  work  speed  is  an  indispensable 
requirement.     This  is  especially  true  of  work  which  is 


254  Organization  and  Management 

essentially  routine,  such  as  accountancy,  stenography, 
and  clerical  work  in  general.  In  the  lighter  mechanical 
processes,  where  large  quantities  of  light  material  have 
to  be  handled  by  hand,  speed  is  also  necessary.  Some 
people  are  able  to  acquire  a  high  speed  of  manual  and 
mental  activity  without  its  being  a  strain.  It  is  this  type 
which  is  best  adapted  to  this  class  of  work. 

The  author  has  seen  employes  whose  temperament 
was  such  that  they  could  not  stand  a  degree  of  speed 
normal  and  easy  for  others.  Certain  well-meaning 
friends  of  labor  lay  entirely  too  much  stress  on  the 
w^ear  and  tear  of  speed  in  industry  and  clerical  work. 
Any  person  who  has  had  experience  in  kindergarten 
w^ork  realizes  that  speed  is  a  natural  gift  and  must  be 
natural  without  any  effort  or  fatigue. 

The  question  of  determining  whether  an  applicant  has 
the  necessary  speed  required  for  a  given  position  may 
be  determined  by  simple  mechanical  tests.  The  lack  of 
speed  is  by  no  means  an  indication  that  the  applicant 
is  undesirable,  since  there  are  certain  other  qualities  fit- 
ting men  and  women  for  the  highest  kind  of  positions, 
which  do  not  go  with  the  temperament  frequently  pos- 
sessed by  persons  capable  of  high  speed.  Failure  in  a 
speed  test  need  not  involve  discouragement  further  than 
arises  from  the  loss  of  the  immediate  position  desired. 

CONCENTRATION 

The  ability  to  give  continuous  conscious  attention  to  a 
certain  line  of  effort  without  allowing  the  mind  to  wan- 
der, or  become  distracted,  is  in  most  cases  the  result  of 
good  school  training  and  discipline.  The  continuation 
of  this  habit  by  persons  who  have  completed  their  school- 
ing depends  a  good  deal  upon  the  ambition  of  the  indi- 
vidual, or  self-satisfaction.    An  elementary  test  for  con- 


Employynent  Problems  255 

centration  would  be  to  require  the  applicant  to  do  a  fairly- 
complex  arithmetical  problem  in  a  short  time  under  con- 
ditions which  would  tend  to  distract  attention.  If  the 
ability  to  concentrate  is  demanded  for  a  position  of 
pretty  high  grade,  the  only  way  to  determine  the  appli- 
cant's ability  in  this  line  is  to  inquire  from  others.  If 
he  has  been  on  the  company's  pay-roll,  possibly  a  re- 
port is  on  file  in  regard  to  this  qualification. 

OBSERVATION 

Some  superintendents  and  foremen  have  the  reputa- 
tion of  being  able  to  spot  any  slight  defect  or  inaccu- 
racy, or  infraction  of  the  rules,  if  they  make  a  casual 
walk  through  their  shops  or  department.  Such  men 
may  be  said  to  have  a  pronounced  degree  of  ability  to 
observ^e.  A  skillful  employer  can  form  judgment  on  the 
observational  ability  of  a  man  by  spending  a  lunch 
hour  with  him  and  leading  the  conversation  in  direc- 
tions which  will  draw  out  the  desired  information. 

BEASON 

An  employe  who  has  been  recommended  as  worthy  of 
a  high  grade  in  reasoning  ability  is  not  likely  to  be 
subject  to  the  so-called  psychology  of  the  mob.  Hfe  is 
apt  to  think  before  he  decides.  A  conversation  carried 
on  by  a  skilled  employment  manager  will  soon  deter- 
mine whether  an  applicant  jumps  at  conclusions  or  bases 
on  reason  his  replies  to  questions. 

INTUITION 

Intuition  is  closely  related  to  obser^-ation  and  reason. 
In  its  crudest  form  it  consists  of  what  are  believed  to 
be  racial  fears,  dislikes,  and  likes.  The  term  is  also 
used  to  express  the  possession  of  the  power  to  form 


256  Organization  and  Management 

judgments  without  any  apparent  application  of  observa- 
tion and  reason.  The  practical  value  of  intuition  con- 
sists in  the  ability  of  an  individual  to  feel  without  rea- 
soning, as  it  were,  what  persons  are  scamps  and  what 
persons  are  honorable;  to  know,  without  thinking  or 
reasoning,  what  sort  of  acts  on  one's  own  part  are  credit- 
able and  which  ones  are  discreditable. 

A  good  many  conclusions  with  regard  to  the  intuitive 
ability  of  an  applicant  can  be  gained  by  large  corpora- 
tions which  conduct  a  trial  department  such  as  is  car- 
ried on  by  the  Curtis  Publishing  Company.  Under  these 
arrangements  applicants  are  paid  during  the  period 
under  which  they  are  on  trial.  During  this  time  the 
employment  manager  has  ample  opportunities  to  form 
judgments  in  regard  to  many  characteristics  of  the  ap- 
plicant. 

APPLICATION,   DILIGENCE,  AND   INDUSTRY 

The  most  desirable  worker  in  the  long  run  is  not  the 
one  who  accomplishes  brilliant  results  by  occasional 
spurts  with  intervening  laj^ses  characterized  by  ineffi- 
ciency, but  the  one  who  maintains  a  uniform,  steady, 
non-strenuous  pace.  Consultation  with  former  employ- 
ers will  give  some  information  as  to  these  qualifications. 
Such  information,  however,  is  not  always  reliable. 
Moreover,  it  is  necessary  that  the  kind  of  work  be  one 
in  which  the  employe  takes  an  interest  and  to  which  he 
is  adapted  before  any  general  judgment  can  be  passed 
on  him  in  regard  to  these  qualifications.  However,  the 
employe  who  knows  that  he  is  being  observed  and  is 
ambitious  for  promotion  is  likely  to  apply  himself. 
Where  a  labor  and  employment  bureau  maintains 
records  as  to  the  efficiency  and  characteristics  of  men, 
it  is  worth  while  for  the  manager  of  such  a  bureau  to 


Employment  Problems  257 

compare  with  the  reports  of  foremen  and  department 
heads  his  opinion  based  on  observation  and  he  should 
make  careful  inquiries  in  case  his  own  opinion  is  dif- 
ferent from  the  reports. 

ACCURACY 

This  is  one  of  the  qualifications  in  regard  to  which 
data  can  be  secured  by  the  test  or  examination  process. 
While  this  qualification  is  extremely  important  in  such 
work  as  is  connected  with  pay-rolls,  invoices,  costs,  time 
records,  and  accounts  in  general,  there  are  classes  of 
work  in  which,  though  desirable,  it  is  secondary  to  other 
characteristics. 

PUNCTUALITY 

One  naturally  thinks  of  the  time  clock  as  the  most  re- 
liable source  of  information  regarding  punctuality. 
There  is,  however,  a  higher  degree  of  punctuality  than 
that  involved  in  promptly  coming  to  work.  This  con- 
sists in  the  getting  out  of  required  reports  on  the  sched- 
uled date;  in  coming  to  committee  meetings  on  time; 
and  in  seeing  that  any  documents,  work,  or  material 
which  must  be  passed  on  to  others  are  conscientiously 
taken  care  of. 

There  are  many  men  of  unquestionably  high  grade 
who  resent  being  gauged  by  the  time  clock  records  of 
their  arrival  in  the  morning  and  after  lunch  time,  but 
who  are  extremely  conscientious  and  punctilious  in  see- 
ing that  no  work  is  retarded  nor  any  person  delayed 
by  their  failure  to  meet  their  engagements  and  appoint- 
ments promptly,  or  to  get  out  and  pass  on  work  on  time. 

ECONOMY 

The  use  of  a  short  pencil  may  be  a  sign  of  slovenliness 
instead  of  an  indication  of  economy.    The  same  is  true  of 


258  Organization  and  Management 

the  use  of  a  defective  pen-point  or  a  worn-out  drill  or 
cutting-tool.  True  economy  consists  in  attaining  the 
greatest  output  with  the  least  expenditure.  The  use  of 
worn-out  carbon  papers  by  stenographers  is-  considered 
by  some  employers  as  a  sign  of  carelessness  rather  than 
of  economy,  since  time  and  eyesight  are  saved  by  clear 
copies.  In  comparing  various  foremen  in  order  to  de- 
termine which  one  shows  the  greatest  economy,  it  is 
desirable  not  to  compare  one  department  with  another 
in  such  matters  as  cost  of  sweeping,  helper's  time,  re- 
pairs, and  in  general,  the  relation  of  indirect  to  direct 
labor,  but  to  compare  each  department's  records  of 
expenditures  related  to  output  month  by  month  and  the 
same  month  in  one  year  with  the  same  month  in  a 
previous  year. 

ORDEK  AND  SYSTEM 

A  man  may  be  neat  and  still  not  be  systematic.  For 
instance,  in  a  foundry  the  flasks  may  be  piled  very  neatly 
in  the  yard,  but  in  such  a  manner  that  there  has  to  be 
a  great  deal  of  unpiling  and  repiling  as  well  as  walking 
a  considerable  distance,  where  a  little  less  neatness  and 
a  better  system  would  have  resulted  in  higher  efficiency. 
An  observant  foreman,  superintendent,  or  labor  super- 
visor will  soon  notice  which  employes  can  organize  and 
systematize  to  the  best  advantage  the  materials  and  tools 
they  have  to  use.  Here  again  a  man  deserves  recognition 
who  is  able  to  save  himself  from  useless  strenuousness 
and  exertion  by  the  application  of  ability  in  planning 
order  and  system  for  his  own  work. 

KNOWLEDGE 

In  employing  a  man  to  do  the  work  of  a  given  trade, 
it  stands  to  reason  that  knowledge  of  that  trade  is  essen- 


Employment  Problems  259 

tial.  The  same  is  true  of  such  work  as  accountancy  and 
stenography.  However,  a  knowledge  of  the  particular 
business  in  question,  obtained  in  a  competitor's  estab- 
lishment, is  sometimes  a  decided  handicap,  since  the  new- 
comer will  find  difficulty  in  adapting  himself  to  different 
mothods.  There  are  many  successful  sales  managers 
who  prefer  to  competitors'  salesmen  those  previously 
employed  in  selling  a  line  entirely  different  from  the 
one  which  they  are  to  sell. 

CULTUBE 

Gentlemanliness  and  refinement  are  necessary  qualifi- 
cations of  men  who  are  to  receive  visitors  and  salesmen. 
Courtesy  is  a  quality  which  is  characteristic  of  most 
well-managed  shops,  even  in  the  roughest  kind  of  con- 
struction work.  One  can  notice  effective  results  accom- 
plished by  foremen  who  are  strict  disciplinarians,  but  in 
no  sense  bullies. 

PBUDENCE 

In  a  general  way  this  quality  means  that  its  possessor 
will  be  cautious,  that  he  will  be  careful  to  look  before  he 
leaps.  The  American  Revolution  was  won  by  the  skill 
of  Washington  and  Greene  in  always  knowing  when  to 
retreat  and  in  turning  possible  defeat  into  ultimate 
victories. 

GRIT  AND   TENACITY 

These  are  among  the  most  important  qualifications  of 
gang  bosses  and  foremen,  who  will  be  called  upon  to 
stand  their  ground  unflinchingly.  These  qualities  should 
characterize  any  men  on  whom  is  placed  the  responsi- 
bility of  carrjdng  into  effect  any  changed  or  new  proc- 
esses or  systems,  since  they  will  have  to  overcome  the 
opposition  of  habit  and  prejudice. 


260  Organization  and  Management 

TACT   AND   DIPLOMACY 

Department  heads  and  supervisional  officers  must  be 
able  to  handle  employes  who  are  temporarily  upset  by 
ill- temper,  misunderstandings,  ill-bealth,  family  troubles, 
or  other  unfavorable  influences.  They  will  have  to  adjust 
many  differences  of  opinion  in  a  way  which  will  still 
maintain  them  in  the  esteem  of  all  parties  to  the  con- 
troversy. Popular  fiction  abounds  with  stories  of  inter- 
national and  industrial  intrigue  in  which  diplomacy  is 
pictured  as  duplicity.  Successful  business  in  America 
is  characterized  by  fair  dealing.  A  fair  deal  does  not 
mean,  however,  that  the  employer  needs  to  show  his 
hand  to  his  adversaries. 

JUDGMENT 

In  order  to  pass  judgment  a  man  must  have  what  is 
designated  as  the  ''judicial  temperament."  He  will  se- 
cure evidence  and  weigh  it  before  he  comes  to  any  con- 
clusion. Authorities  have  been  known  to  postpone  their 
decision  on  important  matters,  in  order  that  they  might 
be  sure  they  were  giving  proper  consideration  to  the 
subject.  Good  judgment  is  an  essential  qualification  of 
anyone  who  is  occupying  an  executive  position. 

RELIABILITY  AND  STEADINESS 

These  terms  are  really  an  addition  to  a  to-be-taken-for- 
granted  essential,  honesty.  A  man  may  be  honest  enough 
to  keep  out  of  jail,  but  it  is  a  higher  degree  of  honesty 
to  be  dependable  in  all  statements,  in  the  fulfilling  of  all 
duties,  and  in  steadfastly  adhering  to  them. 

LOYALTY 

A  man  is  disloyal  who  makes  mean  or  derogatory 
statements  about  his  employer  or  the  business  in  which 


Employment  Problems  261 

he  is  engaged.  There  is  no  disloyalty  in  constructive 
criticism  made  to  the  right  persons  and  in  the  proper 
spirit.  It  is  this  quality,  more  than  any  other,  which 
will  result  in  a  man's  promotion  to  the  very  highest 
positions  in  business. 

INTEGBITY 

Integrity  is  also  another  addition  to  the  so-called 
honesty  which  is  presumed  to  be  possessed  as  an  essen- 
tial characteristic  by  every  applicant.  Integrity  means 
unswerving  resistance  to  any  evil  temptation,  the  ability 
to  stand  one 's  ground  for  honest  principles  in  the  face  of 
opposition  and  intrigue.  This  qualification  is  an  essential 
for  every  employe  in  the  cashier's  department,  the  pur- 
chasing department,  and  store-rooms,  and  also  for  men 
engaged  in  demonstrating  time-study  and  rate-fiLxing 
work. 

THOROUGHNESS 

To  be  thorough  in  industrial  work  a  man  must  be  able 
to  do  things  quickly,  accurately,  and  economically.  Thor- 
oughness, as  a  mental  qualification,  makes  its  possessor 
"go  the  limit"  to  know  all  about  any  position  or  any 
undertaking.  He  will  not  do  a  job  partly  and  then  quit. 
Thoroughness  is  an  essential  qualification  for  a  good 
foreman. 

INITIATPVE 

This  quality  is  closely  akin  to  inventive  ability  with 
the  addition  of  enterprise.  The  possessor  of  initiative 
will  find  a  way  to  overcome  difficulties.  He  will  not  only 
dream  of  new  ways  of  doing  things,  but  will  actually  put 
them  into  effect.  Initiative  is  an  essential  qualification 
for  a  designer,  a  tool-maker,  or  a  systematizer. 


262  Organization  and  Management 

ADAPTABILITY 

This  quality,  in  order  to  be  a  desirable  one,  does  not 
mean  that  its  possessor  is  willing  to  hang  his  hat  any- 
where, to  engage  in  any  kind  of  work  with  laborers  of 
any  nationality.  It  means  that  he  w^ill  do  all  of  these 
things,  if  compelled  by  necessity.  To  be  adaptable  means 
that  a  man  is  a  ''good  mixer."  This  quality  is  necessary 
for  a  salesman  or  promoter. 

OPTIMISM  AND  CHEERFULNESS 

A  man  who  emphasizes  the  positive  rather  than  the 
negative,  who  emphasizes  the  good  rather  than  the  bad, 
who  is  of  a  pleasant  temperament  rather  than  morose 
or  disagreeable,  is  a  desirable  employe.  Optimism  and 
cheerfulness  radiate  contentment  in  a  contagious  way. 
Similarly  it  is  true  that  disagreeableness  and  ''grouch- 
iness"  radiate  discontentment. 

RESERVE 

A  man  with  this  quality  will  not  be  forward  nor 
familiar.  He  will  be  the  possessor  of  dignity.  This 
quality  is  necessary  in  timekeepers  and  watchmen.  A 
certain  amount  of  it  is  necessary  for  superv^isional  offi- 
cials, but  not  enough  of  it  to  amount  to  aloofness.  Too 
much  reserve  in  an  official  is  almost  as  undesirable  as 
insufficient  reserve. 

ENTHUSIASM 

A  man  may  be  loyal,  but  lack  enthusiasm.  Enthusiasm 
is  contagious  and  has  won  as  many  industrial  victories 
as  it  has  athletic  contests.  Employers  who  take  their 
employes  into  their  confidence,  who  give  them  illustrated 
lectures  on  materials,  methods,  and  markets  connected 


Employment  Problems  263 

with  their  business,  and  who  aim  to  make  the  employes 
feel  that  they  are  an  essential  part  of  the  business,  will 
do  a  great  deal  towards  arousing  enthusiasm. 

SINCEEITY  AND  SYMPATHY 

These  qualities  are  indispensable  in  all  employes  who 
are  to  be  engaged  in  social  service,  welfare,  and  better- 
ment work.  Persons  who  have  undertaken  such  work 
merely  to  form  the  acquaintance  of  wealthy  or  influential 
people,  or  as  a  fad,  are  sure  to  make  a  failure  of  it  in 
the  long  run. 

SEIiF-CONTROL 

This  quality  is  shown  in  a  man's  temper  and  in  his 
habits.  It  is  particularly  necessary  for  any  employes 
who  are  apt  to  be  subjected  to  trying  conditions,  and  it 
is  absolutely  indispensable  to  an  exchange  clerk  or  trou- 
ble clerk  in  a  large  department  store,  gas  or  electric  light 
office. 

ABILITY  AS  DETAILIST  OR  GENERALIZER 

In  cost  department  work  ability  as  a  detailist  is  excep- 
tionally desirable  in  the  work  of  making  entries.  When 
it  comes  to  making  up  graphical  reports  and  comparisons, 
ability  as  a  generalizer  is  required.  The  two  qualities 
are  seldom  combined  in  the  same  person. 

OBEDIENCE   TO  ACKNOWLEDGED  AUTHORITY 

Like  adaptability,  this  quality  is  of  highest  value  when 
it  requires  some  conscious  effort  on  the  part  of  one  who 
is  subjected  to  the  authority  in  order  to  be  obedient.  An 
employe  who  follows  like  a  sheep  in  a  flock  would  be  just 
as  likely  to  follow  an  unprincipled  leader  by  reason  of 
his  weakness.     The  ability  to  realize  the  necessity  of 


264  Organization  and  Management 

obedience  to  authority  on  the  part  of  an  otherwise  high- 
spirited  man  is  an  indication  that  he  himself  will  prob- 
ably make  a  good  leader. 

ABILITY  TO  KNOW   MEN 

This  ability  is  partly  intuitive  and  partly  acquired.  It 
cannot  be  acquired  wholly  through  a  study  of  books  on 
psychology.  A  good  many  employers  have  a  great  deal 
of  confidence  in  their  own  ability  to  size  up  a  man  in  a 
very  few  minutes.  As  a  matter  of  fact,  it  is  possible  to 
secure  in  a  brief  interview  reliable  data  in  regard  to  some 
few  qualifications.  It  is  quite  likely  that  these  men  who 
size  up  an  applicant  so  quickly,  concentrate  on  three  or 
four  qualities  such  as  address,  appearance,  reserve,  and 
vitality.  There  is  no  occult  power  which  enables  one  to 
secure  information  with  regard  to  such  qualities  as  dili- 
gence, order  and  system,  or  initiative,  for  example,  by 
means  of  a  brief  interview. 

ABILITY  TO  GET  ALONG  WITH  MEN 

This  trait  includes  a  number  of  qualities  such  as  tact, 
cheerfulness,  and  s^Tnpathy.  Still,  a  person  may  possess 
all  of  the  foregoing  qualities  and  yet  be  so  absorbed  in 
his  work  that  he  cannot  drop  the  absorption  for  a  long 
enough  period  of  time  really  to  get  acquainted  with  the 
human  side  of  his  associates.  A  friendly  disposition  and 
tolerance  of  other  people's  prejudices  and  eccentricities 
are  desirable  in  this  connection. 

SELF-CONFIDENCE 

This  is  an  essential  quality  for  every  leader,  whether 
he  be  a  gang  boss  on  construction  work  or  works  man- 
ager. This  quality  should  by  no  means  be  confused  with 
an  exaggerated  idea  of  one's  own  abilities,  which  will 


Employment  Problems  265 

lead  to  disaster  far  more  quickly  than  timidity  or  a  lack 
of  self-confidence.  If  a  man,  having  received  adequate 
education  and  training,  is  considered  capable  of  a  new 
assignment  given  him,  and  on  reflection  he  finds  nothing 
that  should  prevent  his  succeeding  in  the  undertaking 
except  timidity,  or  inertia,  he  should  welcome  every  new 
experience  as  an  opportunity  to  develop  the  desirable 
quality  of  self-confidence. 

School  and  Education  Recokd 

Modern  school  records  cover  a  considerable  line  of 
data  which  should  be  of  material  assistance  to  an  em- 
ployment manager  in  forming  correct  estimates  of  appli- 
cants. Such  records  reveal  facts  as  to  punctuality, 
application,  conduct,  proficiency  in  various  branches,  and 
time  of  leaving  school.  Inquiries  as  to  the  kind  of  studies 
the  applicant  hkes  best  or  least  and  the  kind  of  reading 
he  at  present  enjoys,  are  frequently  useful. 

Family  History 

Data  with  regard  to  the  father's  occupation,  health, 
nationality,  number  of  brothers  or  sisters  and  their  occu- 
pation, are  also  useful. 

Industeial  Histoby 

It  is  desirable  to  secure  data  in  relation  to  the  previous 
jobs  or  positions  held  by  the  applicant,  the  length  of  time 
he  held  them,  his  reasons  for  leaving,  employer's  reasons 
for  the  leaving,  the  amount  of  earnings  at  the  various 
jobs,  and  likes  and  dislikes  in  regard  to  the  various  jobs. 

Housing  and  Thrift  Data 

Henry  Ford  lays  great  stress  on  the  general  character 
of  the  residence  or  home  condition  of  premises,  orderly 


266  Organization  and  Management 

condition  of  rooms,  home  sanitation,  cleanliness,v^ttention 
to  appearance  and  education  of  children,  amount  of 
savings  in  bank,  and  ownership  or  non-ownership  of  home 
or  building  lot.  In  fact,  the  foregoing  information,  if 
satisfactory,  forms  the  chief  basis  of  the  Ford  Com- 
pany's putting  a  man  in  the  so-called  five-dollar-a-day 
class  of  American  citizens. 

Co-operative  Employment  Agencies 

From  the  foregoing  list  of  qualities,  which  one  needs 
to  consider  before  passing  judgment  on  an  applicant  for 
employment,  it  is  quite  apparent  that  a  good  deal  of 
needless  expense  accrues  when  an  employer  endeavors 
to  determine  for  himself  and  to  keep  on  file  in  his 
own  employment  department  written  data  with  regard  to 
various  applicants  for  positions.  This  energy  should  be 
concentrated  on  accumulating  additional  facts  and  data 
in  regard  to  employes  already  at  work.  A  central  public 
employment  bureau  can  advantageously  gather  together 
most  of  the  foregoing  data,  so  far  as  they  relate  to 
unemployed  persons  or  young  persons  just  beginning  to 
work. 

Is  there  an  All-round  Man? 

The  very  length  of  the  above  list  of  desirable  qualities 
gives  a  negative  answer  to  this  question.  Our  problem, 
then,  is  to  select  those  particular  qualities  which  are  most 
important  for  a  given  job  or  position,  and  then  find 
among  our  applicants  the  one  who  possesses  the  special 
qualifications  for  the  work  at  hand. 

Union  or  Non-union  Men 

The  Supreme  Court  rendered  a  decision  in  February, 
1915,  which  stated  that  it  is  the  inviolable  right  of  every 


Employment  Problems  267 

employer  to  decide  whether  he  shall  employ  union  men 
or  not.  Where  a  company  must  employ  men  who  have 
served  their  apprenticeship  and  have  had  their  experi- 
ence in  skilled  trades,  it  is  very  likely  that  it  is  easier  to 
secure  union  men  than  non-union  men.  If  it  is  at  all 
possible  to  have  all  union  men  or  non-union  men  in  a 
given  trade  or  department,  such  an  arrangement  is  gen- 
erally more  desirable  than  one  in  which  part  of  the  men 
in  a  department  are  union  men  and  part  of  them  non- 
union men. 

If  the  employes  in  a  given  department  are  non-union, 
or  an  attempt  is  to  be  made  to  employ  either  union  men 
or  non-union  men,  the  minimum-wage  scale  should  be  the 
union  rate.  In  order  to  avoid  hostility  on  the  part  of 
organized  labor,  it  is  desirable  at  all  times  to  pay  as  a 
minimum  wage  the  union  scale,  reserving  the  right  to  pay 
any  additional  bonuses  for  increased  efficiency  and  re- 
serving also  the  right  to  select  one's  own  employes  as 
well  as  to  direct  the  manner  in  which  work  is  to  be  done. 
In  a  shop  in  which  there  are  both  union  and  non-union 
men,  when  a  proposal  as  to  new  methods  of  management 
is  explained  to  the  men  and  is  submitted  to  them  for  an 
expression  of  opinion,  it  is  usually  desirable  to  have  the 
groups  of  organized  labor  consider  the  proposals  and 
report  on  them  independently  of  the  employes  as  a  whole. 

It  sometimes  happens  that  union  employes  in  a  shop 
in  which  pleasant  relations  exist  between  the  men  and 
the  management  may  be  entirely  willing  to  accept  bonuses 
or  premium-wage  systems  over  and  above  the  union 
scale,  but  will  not  be  permitted  to  do  so  by  the  vote  of  the 
other  members  of  their  local  union.  Under  these  circum- 
stances arrangements  may  be  made  whereby  the  bonus 
will  be  allowed  to  accumulate  to  the  credit  of  each  man 


268  Organization  and  Management 

aud  be  paid  to  him  in  the  form  of  an  increase  in  his  hourly 
rate.     Tliis  arrangement  should  satisfy  ail  pai"ties. 

Organized  Labor  and  Scientific  Management 

In  February,  1915,  riders  were  attached  to  the  army 
and  navy  appropriations  prohibiting  the  making  of  time 
studies  of  the  movements  between  starting  and  complet- 
ing any  job  of  work  done  by  an  employe  in  any  arsenal 
or  navy  yard.  Any  violation  of  this  prohibition  shall  be 
punished  by  a  fine  of  $500  or  by  imprisonment  for  six 
months. 

These  riders  are  the  result  of  aggTessive  propaganda 
carried  on  by  representatives  of  organized  labor.  The 
reasons  for  their  attitude  are  stated  as  follows,  by  Mr. 
Keating,  of  the  Committee  on  Labor: 

The  tendency  of  so-called  scientific  management  through  the 
timing  (stop-watch)  and  bonus  features  will  be  to  aggravate 
further  the  accident  disabilities  and  mortality  among  American 
workmen  and  to  reduce  the  workman  to  a  mere  mechanical 
instead  of  a  social  and  moral  relation  to  his  work,  and,  moreover, 
it  is  unnecessary  in  order  to  secure  adequate  efficiency  of  labor. 
The  Taylor  system  regards  the  workman  as  a  machine  to  be 
"speeded  up"  to  its  maximum  capacity.  When  this  human 
machine  fails  to  function  to  the  satisfaction  of  the  management, 
it  is  to  be  cast  aside  to  make  room  for  a  new  machine — a  fresh 
workman.  The  authors  of  the  system  do  not  appear  to  have  con- 
cerned themselves  about  the  ultimate  fate  of  the  human  derelicts 
who  may  be  compelled  to  drop  out  because  they  can  not  stand 
the  pace.  Mr.  Taylor  boasts  that,  when  he  installed  his  system 
in  the  Bethlehem  Steel  Works,  he  purposely  made  the  tasks  so 
hard  that  "not  more  than  one  out  of  five  laborers  (perhaps  even 
a  smaller  percentage  than  this)  could  keep  up."  That  may  be 
the  kind  of  "efficiency"  which  produces  dividends  for  the  Steel 
Trust,  but  it  is  surely  not  the  system  which  a  beneficent  Govern- 
ment should  force  upon  its  employes!     The  main  object  of  the 


Employment  Problems  269 

Taylor  system,  and  of  all  its  related  "systems,"  is  to  produce  the 
maximum  of  output  at  the  minimum  of  expense.  The  so-called 
bonus  or  premium  system  is  a  fraud  and  a  snare.  It  really  oper- 
ates to  reduce  the  workman's  wages,  not  to  increase  them,  as  the 
proponents  of  the  Taylor  system  maintain. 

In  reply  to  the  above  cliargos  the  advocates  of  scientific 
management  claim  that  making  time  studies  has  nothing 
whatever  to  do  with  "speeding  up."  Time  and  motion 
studies  disclose  the  expenditure  of  useless  energy  and 
wasted  time.  Attainment  of  safe  conditions  and  avoid- 
ance of  fatigue  of  any  sort  are  among  the  avowed  objects 
of  scientific  management.  The  statement  that  the  Steel 
Trust  does  not  concern  itself  with  the  fate  of  its  employes 
needs  no  further  answer  than  the  illustrations  of  safety 
and  welfare  work  carried  on  by  this  great  corporation 
and  shown  in  the  half-tone  pictures  in  this  text. 

Importance  of  Employment  Bureau 

The  foregoing  discussion  gives  us  ample  grounds  for 
concluding  that  a  capable  employment  manager  is  one  of 
the  most  important  officials  of  a  large  industrial  corpo- 
ration. There  can  be  no  universal  system  for  selecting 
workers  or  keeping  record  of  their  characteristics.  Each 
employment  manager  will  have  to  develop  such  a  system 
to  suit  his  own  conditions,  and  he  ean  use  his  influence  to 
further  the  establishment  of  central  labor  and  employ- 
ment bureaus  where  tests  can  be  made  and  records  kept 
of  the  qualifications  of  persons  seeking  employment. 


TEST  QUESTIONS 

1.  Discuss  the  advantages  of  pleasing  address  and  neatness. 

2.  Is  it  fair  to  demand  a  clean  health  certificate  from  appli- 
cants for  employment  V 


270  Organization  and  Management 

3.  In  what  sort  of  work  is  speed  an  essential  requirement? 

4.  "What  sort  of  positions  demand  concentration? 

5.  In  what  sort  of  work  is  keen  observational  ability  desirable  ? 

6.  What  sort  of  jobs  require  well-developed  reasoning  ability? 

7.  Wliat  sort  of  positions  require  the  possession  of  natural 
initiative  ? 

8.  How  may  we  judge  as  to  an  applicant's  diligence  and 
industry  ? 

9.  How  may  we  determine  as  to  an  applicant's  accuracy? 

10.  Why  is  punctuality  an  important  factor  in  rating  em- 
ployes? 

11.  Distinguish  between  true  and  false  economy. 

12.  What  importance  would  you  give  to  order  and  system  in 
rating  employes? 

13.  What  kind  of  positions  require  a  thorough  knowledge  of 
the  business? 

14.  How  would  you  define  culture? 

15.  What  kind  of  positions  require  grit  and  tenacity? 

16.  How  would  you  proceed  to  train  an  employe  to  develop 
tact  and  diplomacy  ? 

17.  What  is  good  judgment  ? 

18.  Why  is  loyalty  one  of  the  most  essential  qualifications  of 
employes  ? 

19.  WTiat  is  initiative  ? 

20.  What  method  would  you  adopt  for  classifying  and  testing 
applicants  for  employment? 


CHAPTER  XVII 
reports  to  executives 

Duties  of  the  Modern  Industrial  Executive 

There  was  a  time  when  the  only  data  available  for  the 
executive  were  those  that  were  of  a  retrospective  nature ; 
in  other  words  they  were  a  record  of  past  history.  These 
data  were  expressed  only  in  dollars  and  cents  and  in 
columns  of  figures.  The  duties  of  the  old-time  executive 
were  to  see  that  profits  were  made  for  current  dividends, 
that  results  in  this  line  were  obtained  regardless  of 
methods. 

The  modern  industrial  executive  must  think,  plan,  and 
organize  for  the  future.  He  gets  from  the  sales  division 
the  probable  demand,  from  the  manufacturing  divi- 
sion the  probable  output,  and  he  determines  the  most 
profitable  lines  to  manufacture.  He  aims  at  a  definite 
selling  and  manufacturing  program,  and  with  these 
standards  and  plans  as  a  definite  goal,  he  works  towards 
their  achievement.  In  production  he  aims  at  many  other 
things  than  immediate  dividends.  He  must  have  data 
regarding  the  permanence  of  employment,  increased  effi- 
ciency, and  earning  powers  as  profit-makers  of  the 
various  classes  of  employes,  and  he  must  aim  at  higher 
standards  in  these  fields. 

This  involves  reports  and  statistics  containing  much 
information  which  cannot  be  told  in  tables  of  dollars  and 

271 


272 


Organization  and  Management 


District 

SALES,  1915 

SALES  (estimated).  1916 

Pitts- 
burgh 
Office 

$150,000 
$300,000 

$400,000 

$150,000 
$300,000 

$350,000 

l^MxWW^             1 

Locomo-     Coal         Supplies 
tives       Cutters 

Locomo-     Coal        Supplies 
tives       Cutters 

Chicago 
Office 

$100,000 
$200,000 

$250,000 

$100,000 
$200,000 

$250,000 

l^xf^WM       1 

Locomo-  Coal    Supplies 
tives  Cutters 

Locomo-  Coal     Supplies 
tives     Cutters 

Denver 
Office 

O  O  o 
O  O  o 
O  O  o 
o  o"  O 
O  in  u-\ 

<f>  <f>  '^ 

mi  1 

Locomo-  Coal  Supplies 
tives    Cutters 

^$120,000 
2  $  50.000 

$150,000 

Locomo-  Coal  Supplies 
tives    Cutters 

TOTAL  SALES  FOR  1915  COMPARED  WITH 
ESTIMATE  OF  SALES  FOR  1916         o 

8                8                         8                    o 
op                          o                     o 

fC,                       »n                                    CO                       r5  — 

I915| 

^>^><^<^>^\\\\\\\\\\^ 

1 

1916 

kx>^.^Mx\\\\\\\\\\^ 

1         ^ 

Locomo-  O              Coal    O                   Supplies  O                             P 
tives      P           Cutters  P                                P                             2 

en                       in                               t^                      r°  ~" 

Fig.  88. 


-Sales  Manager's  Koport  of  Last  Year's  Sales  and  Next  Year's 
Demand 


Reports  to  Executives  273 

cents  alone.  It  is  only  through  the  medium  of  systematic 
reports  presented  in  such  ways  as  to  encourage  independ- 
ent conclusions  that  general  and  departmental  executives 
can  have  clear-cut  ideas  as  to  existing  conditions  and 
needs  for  the  future. 

SELLiNG-DmsioN  Reports 

Figure  88  shows  a  sales  manager's  report  of  the  past 
year's  sales  and  his  estimates  of  next  year's  demand. 
The  next  year's  demand  is  based  on  carefully  prepared 
estimates  of  the  various  sales  offices.  Note  how  the 
reports  are  made  more  striking  by  the  simple  graphical 
method  used  of  drawing  a  bar  to  scale  representing  the 
figures  which  are  inserted  at  right  angles  to  the  bar.  The 
report  of  each  of  the  three  branch  offices  is  given  sepa- 
rately, while  at  the  bottom  of  the  sheet  is  the  combined 
total  of  the  reports  from  all  three  offices. 

An  investigation  of  the  reports  shows  that  the  Pitts- 
burgh office  expects  no  increase  in  the  business  in  loco- 
motives and  coal-cutters,  and  expects  a  decrease  in  the 
supply  business.  The  Chicago  office  expects  a  business 
identical  with  that  of  the  past  year.  The  Denver  office 
expects  an  increase  in  the  locomotive  and  supply  busi- 
ness, and  no  change  in  the  coal-cutter  business.  The 
combined  expectations  for  the  next  year  show  an  increase 
in  $20,000  worth  of  locomotive  business,  the  same  volume 
of  coal-cutter  business,  and  a  decrease  of  $40,000  in  the 
supply  business,  making  a  total  decrease  of  $20,000 
worth  of  business  expected  the  next  year. 

It  seems  as  though  the  biggest  decline  anticipated  is 
in  the  supply  business  in  the  Pittsburgh  district.  An 
investigation  needs  to  be  started  at  once  as  to  whether 
this  expected  decline  is  due  to  competition  of  local  repair 
shops  which  may  be  getting  away  some  of  the  company 's 


274  Organization  and  Management 

supply  business.  Suggestions  are  asked  as  to  bow  to 
prevent  this.  Among  tbe  suggestions  offered  is  one  tbat 
deliveries  were  not  always  prompt.  This  suggestion  is 
followed  by  a  request  for  a  detailed  classification  of  the 
supply  business  with  estimates  on  next  year's  business. 
This  is  followed  by  recommendations  as  to  the  varieties 
of  articles  to  make  up  for  stock  so  as  to  be  able  to  effect 
prompt  delivery,  especially  on  competitive  items. 

Pkedetermining  Each  Sales  Territory's  Earjtings 

Having  prepared  the  selling  program  for  each  terri- 
tory in  the  way  of  quantity  of  each  style  or  variety  of 
product,  it  is  essential  to  list  against  the  foregoing  data 
the  allowable  manufacturing  costs  together  with  the 
share  of  administrative  burden,  and  the  allowable  sell- 
ing expenses  for  each  territory.  This  will  include  the 
district  sales  manager's  salary  and  expenses,  salaries 
and  expenses  of  all  salesmen  in  the  district,  rent,  insur- 
ance, taxes,  clerical  salaries,  depreciation  of  office  fix- 
tures in  the  district  sales  office,  probable  expenditures 
for  new"  office  furniture  and  fixtures,  stationery,  postage, 
telegrams,  advertising,  and  all  other  district  sales  office 
expenses. 

This  budget  must  be  carefully  scanned  and  compared 
with  the  selling  program,  with  a  view"  to  showing  the 
greatest  possible  profits  in  earnings.  If  it  is  desirable 
to  try  to  modify  the  demand  from  a  style  wliich  is  not  so 
profitable  into  one  which  makes  greater  profits,  the  local 
sales  force  needs  to  be  informed  thoroughly  and  coached 
to  push  energetically  and  tactfully  the  new  line. 

Reports  of  Actual,  Sales  Made 

Each  salesman  should  make  a  daily  personal  report  to 
the  district  office.    The  district  office  should  make  to  the 


Reports  to  Executives  275 

main  office  a  daily  report  covering  sales  made.  A 
monthly  report  must  be  made  showing  the  actual  sales 
for  the  month  together  with  the  actual  expenses  of  the 
district  office  and  the  predetermined  manufacturing  costs 
of  the  articles  sold. 

The  main  office  will  compare  the  selling  expenses  with 
the  predetermined  budget,  and  also  the  actual  manu- 
facturing costs  with  the  predetermined  budget.  Those 
departments  showing  a  record  of  having  done  better  than 
the  budget  estimates  should  be  encouraged  by  an  expres- 
sion of  appreciation,  and  a  thorough  investigation  should 
be  made  of  departments  failing  to  come  within  the  budget 
limits. 

Manufacturing-Division  Repobts 

As  soon  as  the  manufacturing  division  has  received 
the  sales  division's  estimate  of  sales  for  the  coming  year, 
it  will  be  necessary  to  determine  at  that  time  what  prob- 
able shipments  will  have  to  be  made.  To  open  up  this 
question,  records  of  the  previous  year's  shipments,  ar- 
ranged by  groups,  are  desirable.  Figure  89  shows  in 
graphical  form  a  statement  of  shipments  of  locomotives 
for  1914.  This  report  is  submitted  to  the  sales  division 
with  the  request  that  an  approximate  statement  as  to 
the  probable  dates  of  shipment  of  the  various  classes  of 
product  for  the  coming  year  be  prepared  by  the  sales 
division,  and  furnished  to  the  manufacturing  division. 
This  infonnation  will  serve  as  the  basis  for  a  tentative 
manufacturing  program  for  the  year,  which  will  then  be 
divided  up  into  a  tentative  program  for  each  month.  At 
the  beginning  of  each  month  the  manufacturing  and  ship- 
ping program  for  the  rest  of  the  year  and  for  the 
remaining  months  of  the  year  will  have  to  be  modified 
to  suit  the  requirements  of  actual  sales.     The  general 


276 


Organization  and  Management 


manufacturing  and  shipping  programs  will  form  the 
basis  of  a  good  many  subsidiary  reports  which  depend 
upon  them. 

Detailed  Parts  Manufactueing  Program 

From  the  running  inventory  covering  the  balances  on 
hand,  manufacturing  quantities,   and   consumption   for 


I'"'iG.  89. — Shipments  of  Locomotives,  1914 


manufactured  parts,  and  for  shipment  as  repair  parts  of 
various  individual  parts,  annual  and  monthly  programs 
will  next  be  made  up  covering  the  manufacture  of  indi- 
vidual parts  in  quantities.  The  preparation  of  these 
reports  will  require  the  co-operation  of  the  man  in  charge 
of  the  running  inventory  and  balance  of  stores  record, 
the  man  in  charge  of  order  of  work  and  routing,  and  the 
shop  superintendent. 


Reports  to  Executives  211 

WoEK  FOR  Each  Machine  and  Production  Center 

With  the  detailed  parts  manufacturing  program  as  a 
basis  and  past  time  records  as  guides,  it  is  now  possible 
to  anticipate  work  ahead  for  each  machine  and  at  each 
production  center.  This  information  will  serve  as  a 
guide  for  settling  such  questions  as  those  relating  to  the 
advisability  of  purchasing  additional  machinery  and 
tools,  employing  additional  men,  and  enlarging  work 
areas  in  the  shops. 

Classified  Reports  of  Materials  and  Supplies 

The  foregoing  reports  will  furnish  information  as  to 
the  total  quantities  of  the  following  supplies  to  be  pur- 
chased for  the  year :  castings — iron,  steel,  brass,  and  cop- 
per; the  various  kinds  of  bar  stock,  bolts,  nuts,  screw^s, 
and  hardware ;  and  boxing  and  crating  materials  for  the 
pattern  shop,  forge  shop,  and  foundry  machine  shop. 
This  annual  program  will  have  to  be  divided  into  ap- 
proximate monthly  buying  programs,  which  will  have  to 
be  modified  from  month  to  month.  A  statement  of  the 
probable  money  expenditure  for  materials  and  supplies 
together  with  times  at  which  payments  must  be  made 
will  also  have  to  be  prepared. 

Pay-Roll  Estimates 

With  the  previous  year's  pay-rolls  and  the  current 
year's  manufacturing  program  as  a  guide,  estimates  must 
be  prepared  of  the  number  of  men  to  be  employed  for 
the  coming  year,  and  this  divided  into  monthly  estimates. 
These  reports  must  cover  not  only  the  number  of  men 
employed  in  the  various  departments,  but  also  the  amount 
of  money  required  to  meet  salary  and  wage  pay-rolls. 


278  Organization  and  Management 

COMPAKISON   OF   PrOBABLE  MoNEY   InCOME  AND 

Expenditure 

With  the  foregoing  estimates  as  to  money  required  to 
meet  bills  for  materials  and  supplies  to  be  purchased, 
salaries  and  pay-rolls  to  be  met,  and  further  information 
as  to  money  required  to  meet  other  expenses,  such  as 
dividends,  taxes,  insurance,  rents,  repairs,  additions  to 
buildings  and  equipment,  graphical  statements  can  be 
prepared  showing  money  expected  to  be  paid  in  and 
amounts  which  will  probably  have  to  be  paid  out. 

A  statement  of  this  sort  can  be  prepared  in  the  form 
of  curves  in  different  colors  of  ink.  For  money  expected 
to  be  paid  in,  black  ink  may  be  used ;  for  money  expected 
to  be  paid  out,  red  ink  can  be  used.  This  report  may 
indicate  that  during  certain  months  more  money  will 
have  to  be  expended  than  is  available  for  expenditure. 
This  means  that  arrangements  will  have  to  be  made  to 
borrow  money  to  cover  such  periods  and  in  order  to  take 
greatest  advantage  of  cash  discounts.  It  is  quite  likely 
that  money  can  be  earned  by  borrowing  funds  from  the 
bank,  paying  the  ordinary  rate  of  interest  for  the  same, 
in  order  to  take  advantage  of  cash  discounts.  Two  per 
cent  for  cash  is  a  frequent  discount,  while  6  per  cent 
per  annum  is  usually  all  that  will  have  to  be  paid  for 
borrowed  money.  Figure  90  illustrates  the  probable 
form  that  such  a  report  of  money  income  compared  with 
money  outlay  expected  is  likely  to  take. 

Oost-Dbpaetment  Reports 

The  cost  department  should  use  the  manufacturing 
program  reports  as  the  basis  for  plotting  the  labor,  ma- 
terial, and  expense  costs  of  work  to  be  done.  These  pre- 
determined costs  represent  the  limit  beyond  which  the 


Reports  to  Executives 


279 


shop  must  not  go.  In  different-colored  inks  there  will  be 
superimposed  on  these  curves  at  a  later  date  the  actual 
costs  showing  the  savings  made  by  cutting  under  the 
predetermined  costs.  A  manufacturing  establishment, 
in  order  to  be  progressive  and  to  keep  up  with  the  times, 
must  be  constantly  showing  diminished  unit  costs.    This 


$100,000 

— ^ 

\ 
\ 
\ 

90,000 

r 

y 

• 

f 

■~\ 

80.000 

/ 
/ 

f 

/.. 

\ 

/ 

L 

70.000 

/ 

7 

\ 

/ 

\ 

Y^ 

/ 

\ 

\ 

*» 

60.000 

\ 

/ 
/ 
1 

/ 

\ 

y 

^--c 

50.000 

*• 

40.000 

30.000 

20.000 

10.000 

Jan.  FebMar.Apr.MayJun.JulyAug.Sep.Oct.  Nov  .Dec. 

Fig.  90. — Money  Income  and  Outlay  Chart 

—  Money  receipts  expected 

—  Money   expenditures   expected 

does  not  signify  that  lower  prices  are  paid  either  for 
materials  or  labor,  but  that  improved  methods  and 
greater  efficiency  are  being  employed. 

Detailed  Expense  Budget 

The  various   subsidiary  manufacturing   expense   ac- 
counts should  be  plotted  separately.     Previous  records 


280  Organization  and  Management 

of  these  classified  expenses  will  serve  as  a  basis  for  such 
advance  budgets.  Every  person  responsible  for  the  in- 
curring of  expenses  must  have  before  him  his  budget 
which  he  dare  not  exceed  and  which  he  must  constantly 
aim  to  reduce. 

Reports  of  Suggestions 

With  the  record  of  suggestions  made  in  the  past  a 
statement  can  be  prepared  of  the  number  of  suggestions 
made  in  the  various  classes  by  members  of  various  de- 
partments together  "^ith  the  prizes  given  for  such  sug- 
gestions and  the  estimated  savings  as  the  result  of  these 
suggestions,  this  being  accompanied  by  a  statement  of 
the  suggestions  made,  prizes  awarded,  and  the  antici- 
pated savings  to  result  from  suggestions  made  during 
the  current  month  and  year.  A  statement  of  this  sort 
may  be  advantageously  published  in  a  monthly  paper  to 
be  distributed  among  the  employes.  Such  a  monthly 
publication  may  well  be  made  a  medium  for  arousing 
interest,  enthusiasm,  and  loyalty  on  the  part  of  employes. 
The  Ford  ''Times"  is  an  example  of  such  a  pubhcation. 

Profit  and  Loss  Statement 

The  progressive  establishment  will  have  a  profit  and 
loss  statement  prepared  every  month,  instead  of  only 
once  a  year.  This  statement  will  give  in  condensed  form 
the  gross  earnings  from  all  sources  during  the  month, 
gross  expenditures  of  all  kinds  during  the  month,  inter- 
est on  bonds,  preferred  stock  dividends,  common  stock 
dividends,  and  financial  surplus  or  deficit  for  the  month. 
A  graphical  report  of  the  above  items  may  be  advan- 
tageously prepared  for  each  month  of  tlie  current  year 
as  well  as  for  the  corresponding  month  of  last  year. 


Reports  to  Executives  281 

Physical  or  Non-financial  Reports 

Each  industry  will  have  its  own  peculiar  physical  data 
which  need  to  be  reported  at  regular  intervals.  Figure 
91  is  a  typical  report  of  this  sort.  It  represents  a  weekly 
cupola  report  of  a  foundry,  showing  the  number  of  kinds 
and  corresponding  percentage  of  each  kind  and  amount 
of  pig  iron  used,  the  total  iron  charged  to  the  cupola,  also 
supplementary  material  such  as  coke  and  manganese 
used,  good  castings  delivered,  the  scrap,  gaggers  and 
clamps,  flasks  and  bars,  and  total  of  all  castings  made 
expressed  in  pounds  and  in  per  cent ;  also  the  loss  in  the 
cupola  in  pounds  and  per  cent. 

Many  similar  data  can  be  made  the  basis  of  physical 
reports.  In  the  power-plant  such  matters  may  be  listed 
as  the  heating  value,  volatile  matter,  and  ash  in  the  coal 
consumed,  continuous  record  of  unburned  gases  in  the 
stack,  pounds  of  water  used  by  the  boiler,  pounds  of  dry 
steam  delivered  by  the  boiler,  records  of  switch-board 
instruments,  total  pounds  of  coal  burned,  total  pounds 
of  ash  removed,  expression  of  the  above  data  in  unit 
ratios  such  as  pounds  of  coal  per  kilowatt  hour,  etc. 

The  labor  and  employment  bureau  mil  make  reports 
covering  the  number  of  men  quitting,  the  number  of 
men  laid  off,  the  number  of  men  discharged,  the  total 
hours  of  regular  time  work,  the  total  hours  of  overtime 
work,  the  hours  and  pay-roll  for  day  work,  the  hours  and 
pay-roll  for  piece  work,  the  hours  and  pay-roll  for  pre- 
mium work,  the  hours  and  pay-roll  for  bonus  work,  to- 
gether with  explanations  of  any  notable  increases  or 
decreases.  It  should  be  borne  in  mind  that  mere  figures 
are  not  of  much  value,  but  the  relationship  of  the  figures 
to  other  facts  is  important. 


282 


Organization  and  Management 


CUPOLA  REPORT  WEEK  ENDING 


mo 


■  t9lS 


Kind  and  Grade  of  Pig  Iron  Used 


No.  of  Pounds.       PerCenf 


i^_^_ 


fpl^ 


No. 


Pig  Iron 


-^ 


af^ 


oo 


^: 


No.    ^  Pig  Iron 


No.         Pig  Iron 


df  660 


J/^ 


New  Scrap 


/o^oo 


/CO 


Foundry  Scrap 


lMo,o /z^ 


M.  Shop  Scrap 


New 
Olo 


Total 


^%6oo 


Remelt  Scrap 


^/  /<?<:? 


^ 


^^?/ 


Total  iron  to  Cupola 


/oVdco 


Zoom 


No.  pounds  Coke  used  in  Cupola 


/6>B%o 


/^./x 


No.  pounds  Man^nese  used  in  Cupola 


/^/^ 


0./%^ 


Castings  made  but  not  deliver* 


^(^(U&A  ^Mi^J        ^oo 


oo^ 


Good  Castings  delivered 


Foundry  Scrap 


66f6/ 


^^^S 


O60 


M.  Shop  Scrap 


M^ 


OO'^ 


Gaggere  and  Clamps 


£oo_ 


o^ 


Flasks  and  Bars 


/^OO      026 


Total  Castings  made 


Loss  in  Cupola  [Excluding  Remelt.] 


yw^/>  /^^ 


RZMARKS: 


S6/0 


Of¥ 


Note  : 

Per  cent  of  iron  based  on  total  charge. 

Per  cent  of  Casfings  based  on  Castings 
made. 


Fig.  91. — Weekly  Cupola  Report 


Reports  to  Executives  283 

Accumulation  of  reports  from  which  no  definite  con- 
clusions are  reached  is  a  sure  sign  that  such  reports  serve 
no  useful  purpose,  and  should  be  discontinued.  The  mak- 
ing of  reports  is  a  matter  which  can  easily  be  overdone. 
At  the  same  time,  systematic  reports  disclose  conditions 
which  would  othenvise  not  have  been  revealed.  They 
serve  as  a  spur  to  action  where  mthout  them  there  would 
have  been  no  incentive  at  all 


TEST  QUESTIONS 

1.  Discuss  the  necessity  of  reports  to  the  modem  executive. 

2.  What  are  the  advantages  of  preparing  a  selling  program  in 
advance  ? 

3.  How  may  we  prepare  a  budget  for  each  sales  territory? 

4.  What  sort  of  records  should  be  kept  as  to  the  results  ob- 
tained by  each  individual  salesman? 

5.  What  points  have  to  be  considered  in  preparing  in  advance 
an  annual  manufacturing  program? 

6.  What  data  will  guide  us  in  our  manufacturing  program  of 
detail  parts? 

7.  What  statistical  data  will  lead  to  a  sound  judgment  re- 
lating to  the  advisability  of  purchasing  additional  machinery, 
employing  men,  or  enlarging  work  areas? 

8.  From  what  sources  are  data  obtained  to  indicate  the  nature 
of  the  annual  and  monthly  buying  program? 

9.  From  what  sources  are  data  obtained  as  to  future  pay-rolls 
to  be  made? 

10.  What  sort  of  reports  should  be  prepared  to  indicate  the 
relation  of  probable  money  income  to  probable  expenditures? 

11.  How  may  predetermined  costs  be  made  effective  in  holding 
down  actual  costs? 

12.  What  statistics  and  data  afford  a  basis  for  allotting  ex- 
pense budgets  in  advance  in  manufacturing  departments? 


284  Organization  and  Management 

13.  What  are  the  advantages  of  monthly  balance  sheets  and 
profit  and  loss  statements  ? 

14.  What  data  must  be  secured  from  cost  and  stores  depart- 
ments in  order  that  we  may  have  monthly  balance  sheets? 

15.  What  are  the  advantages  of  graphical  charts  in  connection 
with  any  of  the  foregoing  reports? 

16.  What  sort  of  physical  or  non-financial  reports  should  be 
prepared  by  the  foundry? 

17.  What  sort  of  physical  reports  should  be  turned  in  by  the 
power  division? 

18.  What  sort  of  reports  should  be  made  by  the  labor  and 
employment  bureau  ? 

19.  What  sort  of  report  can  be  made  on  the  efficacy  of  a  sug- 
gestion system? 

20.  How  may  we  determine  what  reports  are  worth  while  and 
which  ones  are  not? 


INDEX 


Ability,  organizing,  development  of.  14. 

Accident  and  fire  prevention,  239-43. 
See  also  Committee  on  safety. 

Accounting :  correlation  of  cost  rec- 
ords and  general  accounts.  123-26 ; 
standardized  list  of  impersonal  ac- 
counts, 168-69.  See  also  Costs  ;  Ex- 
pense. 

Accounting  department,  24-25,  26,  82, 
94,  123,  137,  141.  163.  See  also 
Accounting ;   Organization. 

Accuracy  in  employes,  257. 

Adaptability   in   employes,   262. 

Administration  :  defined,  2 ;  distribu- 
tion of  costs  of,  150-51  ;  expense  of, 
120-21,  Ifil  ;  standardization  in, 
167-69.  See  also  Control ;  Organiza- 
tion. 

Air-wasbing;^  52-54. 

American  Bridge  Co.,  gardens  main- 
tained by,  plate  beticeen  242  and 
243. 

American  Society  of  Mechanical  En- 
gineers, conclusions  of,  on  scientific 
management.    191. 

Analytic  manufacturing,  defined,   11. 

Appearance   of  employes,   253. 

Apprenticeship  system,  directed  by  a 
committee,  7.  See  also  Educational 
work. 

Arrangement  of  machinery  and  fix- 
tures, 49-51.  See  also  Plants  and 
eguipment. 

Assembling  department,    90. 

Athletics :  favored  by  nearness  of 
workingmen's  houses,  39 ;  handled 
by  a  committee,  7 ;  by  the  employ- 
ment manager,  108.  See  also  Wel- 
fare  and    betterment   work. 

Automobile  assembling  under  scientific 
management,  205. 

Automobile  industry,  locating,  with 
reference  to  supply  of  materials,  33. 

Banks,  a  factor  in  locating  an  Industry, 
38. 

Benefit  societies,  248-50.  See  also  Wel- 
fare and  betterment  work. 

Billing  department.   113. 

Bonus  system  on  individual  jobs.  227- 
29.    See  also  Wages. 

Bulletin  bo.nrds.  for  data  of  orders, 
104  and  105. 

Bulletining  bureau.  4-5. 

Bureau  :  bulletining,  4-5  ;  Instruction, 
5  ;  order-of-work.  4-5  :  routing,  5  ; 
scheduling,  4-5.    See  also  Control. 


Business  Organization.  See  Organiza- 
tion. 

Buying :  data  regarding  material,  62- 
64  ;  filing  purchase  order  copies,  70- 
71  ;  financial  problems  in,  72-73 ; 
following  up  purchase  orders,  71-72  ; 
knowledge  of  markets  in.  64-05 ; 
Qualifications  of  a  purchasing  agent. 
6l  ;  records  of  former  purchases, 
66 ;  relation  of.  to  receiving  and 
stores  departments.  73-74  ;  requisi- 
tions on  purchasing  department,  68- 
70  ;  the  human  element  in,  67.  See 
also   Purchasing  department. 

Cadbury  Works,  welfare  organization 
of,   239. 

Carnegie  Steel  Co..  laborers,  plate  be- 
ttceen   242   and   243. 

Charts :  of  committee  control.  19 ;  of 
costs  as  a  basis  for  selling  prices, 
120 ;  of  departmental  specialization, 
21;  of  functional  control.  18;  of 
lay-out  of  flour  mill.  45  ;  of  lay-out 
of  gas-engine  manufactiii:ing  plant, 
plate  between  58  and  59  ;  of  lay-out 
of  locomotive  shop,  48  ;  of  lay-out  of 
machine  shop,  plate  betiveen  50  and 
51;  of  lay-out  of  ore  mill,  46;  of 
lay-out  of  structural  steel  plant,  47  ; 
of  line-and-staff  control,  17  ;  of  line 
control,  17;  of  organization  on 
"seven  M's"  principle,  22 ;  of  pay 
increase  under  differential  piece 
work,  218;  of  planning  of  industrial 
activities.  94  ;  of  progress  of  order. 
plate  between  26  and  27  ;  of  progre.ss 
of  order  ('•water-bottle"),  24  ;  of  re- 
lation of  material  records  to  various 
departments.  81  ;  of  sources  of  cost 
data,  132  ;  of  standardized  organiza- 
tion. 167-68  :  of  standardized  organ- 
ization in  the  production  division, 
1.69 ;  showing  how  pay  varies  with 
output  under  ordinary  piece  rate, 
21o ;  showing  working  of  Diemoi" 
combined  system.  230 ;  showing 
working  of  Emerson  eflQclency  sys- 
tem. 232  :  showing  working  of  Gantt 
bonus  system,  227 ;  showing  work- 
ing of  Ualsey  premium  system.  222  ; 
showing  working  of  Indlvldual-job 
bonus  system,  22S ;  showing  work- 
ing of  Rowan  premium  system,  226. 
See  also   Charting. 

Charting :  committee  control,  10-20  ; 
departmental    specialization,    20-21  ; 


285 


286 


Index 


functional  control,  18-19,  21-22 : 
Une-und-staff  control,  17-18 ,  line 
control,  17-18;  processes,  44-46; 
progress  of  orders,  23-27  ;  responsi- 
bilities of  department  beads,  28-29  ; 
routing  individual  parts  or  classes 
of  material,  47-49.    6'pe  also  Cliurts. 

Cincinnati,  a  center  of  the  macblne- 
tool   business,   39. 

Climate :  a  factor  in  locating  an  in- 
dustry, 34. 

Clock  for  use  in  motion  pictures.  199- 
200,  plate  between  202  awl  ^(Ki. 

Collective  bargaining,  not  Interfered 
with  by  sclentlflc  management,  195. 
See  also  Union  men. 

Collective  contract  work,   210-20. 

Combination  :  leading  to  specialization, 
8-9 ;    partial   and   complete,    10. 

Commercial  offices.  58. 

Committee  on  complaints,  7 ;  on  cost 
reductions  and  economies,  7  ;  on  edu- 
cation, 7;  on  manufacturing.  0;  on 
new  designs  and  products,  7 ;  on 
safety,  7 ;  on  standards.  182  ;  on  sug- 
gestion, 6-7  ;  on  tools,  6  ;  on  welfare, 
7.  238-39.     See  also  Control. 

Committee  controL  5-7,  19-20. 

Conopetltion :  lx>tween  transportation 
llnee,  an  advantage  to  an  indut-try, 
35-36 ;  ruinous,  based  on  Inaccurate 
costs,    114. 

Complaints,  committee  on,  7. 

Concentration  In  employes,  254-55. 

Concerts,  244. 

Consecutive   processes,    exemplified,    11. 

Contract  work,  214-20. 

Control :  by  committee,  5-7 ;  charting 
the  various  types  of.  16-29  ;  defined, 
2  ;  functional,  4  5  ;  line.  2-3  ;  Une-and- 
staff,  3-4  ;  specialization,  8-9  ;  special- 
ization and  functionalizatlon  con- 
trasted, 9-10;  system,  11;  types  of, 
compared,  7-8.  See  also  Organization. 

Co-operative  employment  agencies.  266. 

Corporation  Schools,  National  Associa- 
tion of,   243. 

Cost  department,  25,  83,  103,  126,  127, 
128,  131.  136,  139.  141.  147.  148. 
See  also  Costs. 

Costs :  as  a  basis  of  selling  prices, 
114-15  ;  assembling  cost  data  on  ma- 
terial and  labor,  142-45  ;  classifica- 
tion of,  119  ;  committee  on  reduction 
of,  7  ;  comparative,  118.  145-47  ;  com- 
parison or,  vrlth  probable  receipts. 
278-79  ;  co-operation  between  cost  de- 
partment and  accounting  department, 
163;  correlation  of  cost  records  and 
general  accounts,  123-26;  correlation 
of,  to  other  manufacturng  data,  118; 
determination  of,  112-29;  distribution 
of,  in  administrative  expenses.  150- 
51  ;  distribution  of  In  manufacturing 
expenses.  151-161  :  distribution  of  the 
expense  burden,  150-63  ;  elements  of, 
119-22  ;  estimated  In  sales  manager's 
report,  274 ;  importance  of  keeping 
elements  distinct,  122  ;  inaccurate  or 
Inadequate.  112-13;  lower  production 
costs  necessary,  115-17  ;  manufactur- 
ing cost  different  from  selling  cost. 
128-29  ;  manufacturing  expense  In  ac- 
counting, 126 ;  methods  of  collecting 


on  material  and  labor,  131-48 ;  need 
of  accurate,  113-14 ;  of  purchasing, 
receiving,  and  storing,  74  ;  periodic 
reports  of,  by  cost  department,  147  ; 
of  repairs  and  detailed  parts.  117-18  ; 
reports  on,  278-79 ;  sources  of  cost 
data  on  material  and  labor,  142 ; 
standing  expense  orders,  161-63  ;  sup- 
plementary reports  of.  by  coat  depart- 
ment, 148 ;  waste  disclosed  by  cost 
system,  115.  See  also  Cost  depart- 
ment. 

Cross-liatchlngs  to  represent  material  In 
drawings,  172. 

Culture  In  employes,  259.  See  also  Wel- 
fare and  l)elterment  work. 

CMrtls  Publislilng  Co.,  trial  department 
conducted  by,  256. 

Departmental  specialization,  charting. 
20-21. 

Departments,  arrangement  of,  by  proc- 
esses. 51  ;  in  factories,  8-9.  See  also 
Organization  ;  Plants  and  equipment. 

Designing  department.  23.  80,  100,  170. 

Detallist,   263. 

Diemer  combined  bonus  and  premium 
system,  229-30. 

Diligence  in  employes,  256-57. 

Direct-labor  account,  126.  See  also 
Costs. 

Dlstrllxiting  Industry,  11. 

Divisional  control  :  In  an  agricultural 
machinery  manufacturing  plant,  3 ; 
in  railroads,  3. 

Drafting  and  designing  space,  58. 

Drawing  department.  23  ;  standardiza- 
tion In.  170-73. 

Economies,  committee  on,  7. 

Economy,  in  employes,  257-58. 

Educational  record  of  employes,  265. 

Educational  work :  activities  enumer- 
ated, 243-44 ;  committee  on,  7 ; 
planned  by  department  manager,  108  ; 

Efficiency  :  broad  and  narrow  Interpre- 
tation of,  186 :  defined,  12 ;  reports 
on.  148 ;  standards  of,  178-79.  See 
alfto   Scientific  management. 

Efllclency  Society  of  America,  informa- 
tion-filing plan  devised  by  the.  173. 

FCfflciency  system  of  wages,  230-31.  See 
also  Emerson.  Harrington. 

Emerson,  Harrington  :  his  sliding  scale 
for  wages.  231.  See  also  Scientific 
management 

Employes,  desirable  qualifications  In, 
252-65  ;  health  of.  cared  for  by  a  com- 
mittee. 7.    See  also  Labor. 

Employment :  agencies  for,  co-opera- 
tive. 266  ;  bureau  of,  269  ;  problems 
of.  252-69;  reports  on,  281.  See  also 
Labor,  Employes. 

Employment  manager.   107,   108,   139. 

Energy  of  employee.  253. 

Enthusiasm  In  employes,  262-68. 

Equipment.  See  I'lants  and  equipment ; 
machinery  ;    Purcliaslng   department. 

I.xecutlves  :  duties  of,  271-73  ;  reports 
to,  271-83.  See  also  Administration  ; 
Control ;    Organization. 

Expense :  administrative,  distribution 
of.  150-51  ;  co-operation  between  cost 
department    and    accounting    depart- 


Index 


287 


ment,  163 ;  distribution  of  burden, 
150-6^;  manufacturing;.  126-28;  151- 
61  ;  manufacturing,  allotment  of  by 
labor,  153-58 ;  manufacturing,  allot- 
ment of  by  macblnes,  159-61  ;  manu- 
facturing, allotment  of  by  product, 
152-53 ;  standing  expense  orders, 
161-63.  See  also  Costs. 
Experts,  functional,  duties  of,  4-5. 

Family  history  of  employes,  205. 

Fatigue,  208-209,  217.  -b'ee  also  Scien- 
tific management. 

Finance.  See  Accounting  department ; 
Costs  ;   Organization. 

Finances,  planning  for,  94.  See  aUo 
Executives. 

Financial  problems  in  buying,  72-73. 

Financing  industry.    11. 

Fire  prevention,  239-41  ;  a  factor  in 
locating  an  industry.  40 :  arrange- 
ments for  in  tlie  plant.  57. 

Fixtures,  selection  and  arrangement  of, 
49-51.  See  also  Plants  and  equip 
ment. 

Floor  area,  50. 

Flour  mill,   lay-out  of.  45. 

Following   up   purchase-orders,    71-72. 

Ford  Motor  Works,  ventilation  in,  plate 
between,  242  and  243. 

Foremen's  offices.  56-57. 

Forms,  standard,  in  tiie  administra- 
tion division,  168. 

Frick.  U.  C.  Coke  Co.,  swimming  pool 
maintained  by,  plate  between  242 
and  243. 

Functional  control,  4-5 ;  charting,  18- 
19,  21-22  ;  compared  with  other  types, 
8  ;  contrasted  with  specialization.  9. 
See  also  Control. 

Functional  experts,  duties  of,  4-5. 

Gantt  bonus  system.  226-27. 

Gardens,  i>late  bctueen  242  and  243. 

Gas-engine  manufacturing  plant,  lay- 
out of,  plate  between  58  and  59. 

Generalizer,    263. 

Getting  along  with  men,  264. 

Gilbreth.  Frank  B.  :  on  scientific  man- 
agement, 192 ;  motion  studies  by, 
201-203  ;  use  of  moving  pictures  by, 
199-201. 

Grand  Itapids.  a  center  of  the  furni- 
ture business,  38. 

Grit  In  employes,  259. 

Halsey  premium  system,  221-24. 
Handling,   time  standards   for.   178. 
Heads    of    departments :     brouglit     to- 
gether   at    committee    meetings,    6 ; 

charting    responsibilities    of,     28-29. 

See  also  Organization. 
Health  of  employes.  253  ;  cared  for  by 

a  committee,  7.    See  also  Welfare  and 

betterment  work. 
Heating  a  plant,  52-54. 
Home    l>etterment.    looked    after    by    a 

committee,   7. 
Homes  of  employes,  265-66. 
Hospital     (emergency),    plate    between 

242  and  243. 
Hot-blnst  system.  52-54. 
Hourly-expenso-rate  method  of  alloting 

manufacturing  expense,  155-56. 


Human  element  in  buying,  67. 
Humidifying  a  plant,  52-54. 

Inducements,  special,  a  factor  in  locat 

ing  an  industry,  37. 
Industrial  engineers,  43. 
industrial  history  of  employes,  265. 
Industrial    surveys,    40-41. 
Industry  :   classes  of,    11  ;   distributing. 

11  ;    financing,    11  ;    locating   an,    31- 

41  ;  producing,  11  ;   transporting,  11. 
Information  department,  172-73. 
Initiative  in  employes,  261. 
Inspection  department,  23. 
Inspectors'  quarters,  57. 
Instruction  bureau,   5. 
Instruction  cards  for  orders,  102,  204- 

206. 
Insurance,  249. 

Integration.     See    Combination. 
Integrity  in  employes,  261. 
Intuition  in  employes,  255-56. 
Inventories,  perpetual,  of  stores,  83-86. 

Job-card,  140. 

Judgment  in  employes,  260. 

Keating,  Edward,  of  Congressional 
Committee  on  Labor ;  his  statement 
against  scientific  management,  268- 
69. 

Knowledge  in  employes,  258-59. 

Knowledge  of  men,  in  employes,  264. 

Labor :  advantages  of  standardization 
to  workmen,  J  66;  cost  of,  121;  di- 
rect-lalx)r  account,  126 ;  direct-labor 
data,  137-41  ;  disadvantages  of  stand- 
ardization to  workmen,  166-67  ; 
methods  of  collecting  costs  of,  131- 
48  ;  pay-roll  account,  125  ;  planning 
as  to  employment,  107-8  ;  reports  on, 
281.  See  also  Employment ;  Organ- 
ization ;    Union   men ;    Wages. 

Laborers  holding  stock  In  steel  works. 
plate  between  242  and  243. 

Labor  supply  :  a  factor  in  locating  an 
industry,  36-37 ;  local  labor  market, 
39.    See  also   Labor. 

Lay-out  of  a  manufacturing  plant,  43- 
49.     S«e  also  Plants  and  equipment. 

Library,  managed  by  a  committee,  7. 

Library  officials,  co-operation  of,  in 
eAlucational  work,   244. 

Light-bulb  in  motion  study,  plate  be- 
ixoeen  200  and  201.  202-203. 

Lighting   a   plant,    .54-55. 

Line-and-staff  control,  S-4 ;  charting 
of.  17-18 ;  compared  with  other 
types,  7-8. 

Line  control,  2-3;  charting  of,  17-18; 
compared  with  otiier  types,  7-8. 

Local  and  general  burden  rates  in  allot- 
ting manufacturing  expense,  156-58. 

Locating  an  industry,  31-41  ;  for  cli- 
mate, 34  ;  for  fire  prcTentlon,  water 
supply,  and  sanitation,  40 ;  for  labor 
supply,  36-37 ;  for  local  trade  cen- 
ters, 40 ;  for  material.  32-33 ;  for 
money  market,  38  ;  for  power,  33-34  ; 
for  sales  markets,  38-39  ;  for  special 
Indncements,  37 ;  for  transportation 
facilities,  34-38;   industrial   surveys, 


288 


Index 


40-41 ;  local  labor  market,  39  ;  local 

site.  39. 
Locomotive  shops.   lay-out  of.  48. 
Lo.valty    in    employes,    260-61. 
Luncheons.    244-45. 

Machinery :  opposition  to  improved, 
116:  safceu.Trdina:,  240,  plate  be- 
tween 242  and  243:  safetruardlns  of, 
handled  bj'  a  committee,  7  ;  selection 
and  arrangement  of,  49-51  ;  time 
standards  for,  175.  See  also  Plants 
and  equipment. 

Machine-shop,  lay-out  of,  plate  between 
50  and  51. 

Management :  defined.  2  ;  efficiency  in. 
12  :  scientific,  184-05  :  system  in,  11- 
12.    See  also  Orgrani/ation. 

Manufacturing:  analytic.  11;  commit- 
tee on,  G.  80,  100 ;  consecutive  proc- 
esses in.  11  :  costs  of.  119-21.  126-29. 
141-42.  151-62 :  intermittent  proc- 
esses in.  11  :  plants  and  equipment 
for,  43-59  ;  reports  on.  275  :  simul- 
taneous processes  in.  11  :  standard- 
ization in  products  of,  169-81  ;  syn- 
tlietic,   11.    See  alfto  Organization. 

Manufacturing  industries,  classes  of. 
11. 

Mapping  motions,  201-203. 

Margin  of  safety,  in  costs,  121-122. 

Marguerite  (town  of^,  plate  between 
242  and  243. 

Markets  :  for  sales,  a  factor  in  locating 
an  industry,  38-39  ;  knowledge  of,  in 
buying,   64-65. 

Materials  :  accounting  for.  77-78.  125  ; 
a  factor  in  the  location  of  an  in- 
dustry. 32-33  :  costs  of  analyzed.  119- 
20 :  data  regarding.  62-64".  136-37 ; 
determination  of  requirements  for. 
76-77 :  financial  importance  of.  77 ; 
knowledge  of.  62:  makinc:  entries  of, 
in  the  stores  ledger,  86-89  ;  material 
burden  in  accounting,  124.  137 ; 
methods  of  collecting  costs  on.  131- 
48  ;  perpetual  inventories  of,  83-86  : 
physical  features  of  store  rooms.  89- 
91  :  receiving,  storing  and  recording 
of,  76-91  :  relation  of  material  rec- 
ords to  various  departments,  80-83  : 
reports  on.  277.  281-82  :  materials, 
routing  of,  47-49  :  showing  course  of. 
on  charts.  27  ;  specifications  for,  78- 
80 :    standards   in,    174. 

Medical  and  hygienic  activities.  246. 
See  also  Welfare  and  betterment 
work. 

Minneapolis,  supplies  water  power  for 
flour  mills,  34. 

von  Moltke,  developed  staff  principle, 
3-4. 

Money  market,  a  factor  in  locating  an 
industry.   38. 

Motion   studios.   197-210. 

Moving    pictures.     199-201,     plate     be- 

■   t^veen  202  and  203. 

M's,  the  seven,  22-23. 

National    Association    of    Corporation 

Schools,   243. 
National    Tube    Co..    play-grounds    and 

hospital    maintained    bv.    plates    be- 

ticeen  242  and  243. 


New  designs,  committee  on.  7. 

New  England,  leader  in  textile  manu- 
facturing,   33. 

New  England  Butt  Co.,  motion-studies 
by.  2U0,  202. 

New  products,  committee  on,  7. 

Niagara  Falls,  supply  cheap  water 
power.   34. 

Non-union  men,  267-68.  See  also  La- 
bor. 

Obedience  in  employes,  263-64. 

Observation  in  employes,  255. 

Oil  companies,  an  example  of  integra- 
tion, 10. 

Optimism    in   employes,    262. 

Order  and  system   in  employes,  258. 

Order  department.  100.  10:5.  131.  134. 
135.  136.    See  also  Orders. 

Order-of-work :  manager  of,  103,  105, 
107  :  bureau  of,  4-5.  See  also  Organ- 
ization. 

Orders :  charting  progress  of.  23-27 ; 
data  regarding.  131-36;  job-card  for, 
140:  order  forms  for  purposes  of 
record  of.  131-36. 

Ore   mill,    lay-out  of,    46. 

Organization  :  diarting  the  various 
types  of,  16-29 ;  defined,  1  ;  divi- 
sional, in  railroads,  3 ;  for  buying, 
61-74  ;  for  committee  control,  5-7 ; 
for  departmental  arrangement  by 
processes.  51  :  for  efficiency.  12 ; 
for  functional  control.  4-5:  for  line- 
and-staff  control,  3-4 ;  for  line  con- 
trol, 2-3  ;  for  receiving  and  shipping, 
56 ;  for  receiving,  storing,  and 
recording  materials,  76-91  ;  for  spe- 
cialization, 8-9  :  for  welfare  and  bet- 
terment work.  237-39  ;  industrial  en- 
gineers, 43  ;  of  manufacturing  plants 
and  equipment.  43-59  :  scientific  man- 
agement. 184-195  :  selection  and  ar- 
rangement of  machinery  and  fixtures, 
49-51  :  specialization  and  function- 
alization  contrasted.  9-10;  system  In, 
11-12;  'three-coJjmn"  type.  22-23; 
types  of  control  compared,  7-8  ;  use 
of  technical  terms  in.  13. 

Organized  labor  and  scientific  manage- 
ment, 268.  -See  also  Labor ;  Union 
men. 

Organizing  ability,  developing,  14. 

Overtime,  payment  for,  180. 

Parkhurst.  Frederick  W..  his  modifica- 
tion of  Taylor's  design  of  a  planning 
department.  98. 

Parts,  routing  of,  47-49.  See  also 
Charting. 

Pattern  department,  standardization  in, 
173-74. 

Pay-roll  account,  125.    See  also  Wages. 

Penn.'ylvania.  adapted  to  iron  and  steel 
industry,  32. 

Percentage-on-direct-lahor  method  of  al- 
lotting manufacturing  expense,  153- 
5. 

Personality,  an  agreeable.  Important  in 
organizing  work,   14. 

Physical  training.  246-47.  See  also 
Welfare   and   betterment   work. 

Piece-rate,  differential.  216-19 ;  ordi- 
nary. 214-16. 


Index 


289 


Plg-iron  safety  shield,  plate  between 
242   and   243. 

Planning.  93-111;  as  to  employment, 
107-S  ;  as  to  finances,  94  ;  as  to  pro- 
duction. 96  ;  as  to  sales,  94  ;  does  It 
Involve  additional  non-productive  la- 
bor? 108-10;  how  work  is  to  be  done, 
102-.3 ;  materials  for  shop  orders, 
100-101  ;  separation  of,  from  routine 
activities.  99-100  :  standardization  in, 
174  ;  when  work  is  to  be  done,  103-7  ; 
where  work  is  to  I)e  done,  101-2 ; 
work  in  tlie  shops,  100-107.  See  also 
Planning  department. 

Planning  department,  25.  83,  105,  106, 
136.  139.  162 ;  designed  by  F.  W. 
Taylor,  97-98 ;  fixtures  for.  57 ; 
Parkhursfs  modification  of  Taylor's 
plan  for.  98.     See  also  Planning. 

Plants  and  equipment,  manufacturing, 
43-59  ;  departmental  arrangement  of, 
by  processes.  51  ;  heating,  ventilat- 
ing, humidifying,  and  air-washing 
apparatus  for,  52-54  ;  industrial  en- 
gineers, 43 ;  light  for,  54-55 ;  lay- 
out for,  43-49  ;  power-generation  and 
transmltting-apparatus  in,  51  ;  proc- 
ess-mapping. 44-46 ;  receiving  and 
shipping,  56 :  routing  individual 
parts  or  classes  of  material,  47-49  ; 
selection  and  arrangement  of  machin- 
ery and  fixtures,  49-51.  See  also  Or- 
ganization. 

Power,  a  factor  in  locating  an  industry, 
33-34. 

Power-generation  and  transmltting- 
apparatus.  51. 

Prices:  based  on  costs,  114-15:  effect 
of  maintaining,  when  costs  decrease, 
117. 

Processes,  departmental  arrangement 
by.  51. 

Processing,   standardization  in,   174-75. 

Process-mapping.  44-4G.  See  also  Chart- 
ing. 

Producing  Industry,  11. 

Product :  standardization  of.  169-70 ; 
standardized    testing  of,    180-Sl. 

Production,  planning  for,  96.  See  also 
Organization. 

Profit :  and  loss,  report  on,  280  ;  an  ele- 
ment in  costs,  121-22 ;  how  Increased, 
117. 

Program  for  manufacturing  detailed 
parts.   276-77.     See  also  Planning. 

Promotion,  often  dependent  on  organiz- 
ing ability,   14. 

Prudoncp  in  employes.  259. 

I'unrtuality   in  employes,  257. 

I'urchase-order  copies,  filing  of.  70-71. 
See  also  Records  of  former  purchases. 

Purchasing  agent,  assistant  to,  61  ; 
qualifications  of.  61. 

Purcliasing  department,  25.  82,  88, 
94,  101,  124,  137,  148. 

Quotations,  record  of,  67. 

Railroads,  divisional  organization  in, 
3.    See  also  Transportation  facilities. 

Rapeer.  Dr.  :  his  list  of  the  require- 
ments of  good  standards,  182. 

Reason  in  employes,  255. 


Receiving  and   shipping,   56.    See   also 

Organization  :    Shipping    department. 
Receiving   and   stores   departments,    re- 
lation of,  to  purchasing  department, 

73-74. 
Receiving    materials,    76-91.     See    also 

Stores    department. 
Recording  materials,   76-91, 
Records   of  former   purchases,   66.     See 

also   Purchase-order  copies,   filing  of. 
"Red  Tape,"  defined,  11. 
Reliability  in  employes,  260. 
Reports  of  materials  and  supplies,  277. 

iS'ee  also  Materials. 
Reports,   to  the  executive,   169. 
Requisitions  on  purchasing  department, 

68-70. 
Reser\e  in  employes,  262. 
Responsibilities    of    department    heads, 

charting.  28-29. 
Rest-periods.  208-209,  244-45.    See  also 

Welfare   and   betterment   work. 
Route-and-time  sheet,  103-5. 
Route  manager,   101. 
Route  sheets  for  orders,  101-2. 
Routing  bureau.  5. 
Routing  individual  parts  on  classes  of 

material.   47-49. 
Rowan  premium  system,  224-26. 

Safeguarding  machinery,  handled  by  d 
committee,  7.  See  also  Safety  meas- 
ures. 

Safety  committee,  7. 

Safety  measures.  239-43.  See  also  Wel- 
fare and  betterment  work. 

Salaries  :    See  Accounting. 

Salaries  :    cost-keepers  of,  113. 

Sales  :  markets  for.  a  factor  in  locat- 
ing an  industry,  38-39  ;  planning  for, 
94-96 ;  reports  on,  272-75.  See  also 
Organization. 

Sales  department,  80,  100,  103,  121, 
12.S.  129,  167,  181,  243.  See  also 
Organization. 

Sanitation,  a  factor  in  locating  an  In- 
dustry, 40.  See  also  Welfare  and 
betterment   work. 

Scheduling  bureau,  4-5.  See  also  Plan- 
ning. 

Scientific  management,  184-195  :  appli- 
cation of,  186-88  ;  applying  data  and 
standards  of,  189.  ;  broad  and  nar- 
row interpretation  of.  184-85 ;  con- 
clusions of  the  American  Society  of 
Mechanical  Engineers  regarding, 
191  ;  continued  Investigation  in,  189- 
90;  genuine  distinguished  from  false 
applications  of.  185-S6;  objections 
to,  192-95;  obstacles  to,  191-195: 
organized  labor  and,  268 :  securing 
maximum  prosperitv  for  all,  190:  se- 
curing of  data  for.  188-89  :  Taylor's 
principles  of.  1!)0:  time  and  motion 
studies  for,  197-210.  See  also  Labor: 
Organization. 

Selection  of  machinery  and  fixtures.  49- 
50. 

Self-confidence    in    employes.    264-65. 

Self-control  in   employes.    203. 

Selling:  expense  of.  analyzed.  120-21: 
standardization  in.  181;  typical 
standing  orders,  162-63.  See  also 
Organization. 


290 


Index 


Seven  M's,  the.  22-23. 

Shipping  department,  82,  89,  90,  121. 
See  also  Organization. 

Simultaneous  processes,  exemplified, 
11. 

Sincerity  In  employes.  263. 

Social  activities.  24.5-46 ;  favored  by 
jiearness  of  working-men's  homes. 
39 ;  handled  by  a  committee,  7  ; 
planned  by  employment  manager. 
108.  See  also  Welfare  and  better- 
ment work. 

Society  for  Promotion  of  the  Science 
of  Management,  the.  189-90. 

Specialization  :  a  fundamental  principle 
of  modern  business,  8-9 ;  contrasted 
with  functionalizatlon,  9 ;  depart- 
mental, charting  of,  20-21  :  harmful 
results  of,  9.  See  also  Labor ;  Or 
ganizatlon. 

Speed  of  employes,  253-54. 

Speed  studies,  personal  qualifications 
for.   10. 

Staff   principle,   3-4. 

Standards :  importance  of,  165 ;  per- 
manence of,   181. 

Standardization,  165-82 ;  advantages 
of,  105-66  ;  disadvantages  of,  166-67  ; 
Dr.  Rapeer's  list  of  the  requirements 
of,  182 ;  of  efficiency.  178-79 ;  of 
handling  operations.  178  ;  of  machine 
operations,  175.  See  also  Scientific 
management :  of  materials,  174  ;  of 
planning  and  supervising,  174 ;  of 
processing.  174-75  ;  of  product.  169- 
70  ;  of  selling,  181  ;  of  the  adminis- 
trative division,  167-69  ;  of  the  draw- 
ing department,  170-73  ;  of  the  pat- 
tern department.  17.3-74 ;  of  the 
production  division.  169-81  ;  of  the 
testing  of  product,  180-81  ;  of  tools. 
175-77:  of  wages.  179-80.  See  also 
Scientific  management. 

Standing  expense  orders.  161-63. 

Steel  companies :  an  example  of  inte- 
gration. 10;  located  where  material 
is  abundant,  32-33. 

Stock  room,  27,  82.  See  also  Organiza- 
tion. 

Stop-watch  In  motion  study,  193,  199. 
plates  between  200  and  201,  202  and 
203. 

Stores  :  accounting  for,  77-78  ;  depart- 
ment of.  25.  118,  124,  137;  ledger 
for,  86-89  :  physical  features  of,  89- 
01.    See  also  Organization. 

Store  rooms.  55  ;  Storing  materials,  76- 
91.    See  also  Store  rooms. 

Stnictural    Steel-plant,    lay-out   of,    47. 

Suburban  sites,  often  remote  from  good 
fire-departments.   40. 

Suggestions  :  committee  on,  6-7  ;  han- 
dled by  a  committee,  6-7  ;  reports  of, 
280;  system  of.  247-48. 

Superior  iron  fields.  32-33. 

Surveys,    Industrial,    40-41. 

Swimming  pool,  plate  between  242  and 
243. 

Sympathy   in   employes,   263. 

Synthetic  manufacturing.   11. 

System,  defined,  11-12. 


Tact  in  employes,  260. 

Taylor,  Frederick  W.  :  beginnings  of  his 
work.  232 ;  experiments  in  metal 
cutting,  188-90;  on  objections  to 
scientific  management.  191  ;  planning 
department  designed  by,  97-98  ;  prin- 
ciples of  scientific  management,  190. 

Technical    terms,    use    of,    13. 

Templets.    50-51. 

Testing  departujent,  2.3-24,  180. 

'J'estlng  product,  standards  for,  180-81. 

Thoroughness  In  employes,  261. 

"Tliree-column"  tvpe  of  organization, 
22-23. 

Thrift  in  employes,  265-66. 

Time  and  motion  studies.  197-210  ;  al- 
lowances for  exceptional  conditions 
in,  207-208 ;  definitions  for,  197 ; 
doing  the  work  according  to  Instruc- 
tions, 205-207  ;  expense  of,  210  ;  In- 
spection, 20910;  mapping  motions, 
201-203  :  method  of  timing  in,  199  ; 
moving  pictures  in,  199-201  ;  not 
driving,  208-209  ;  prohibited  in  U.  S. 
arsenals  and  navy  yards,  268-69 ; 
publishing  of  data  of.  210;  qualifica- 
tions of  observer  in,  203-204 ;  the 
instruction  card.  204.  206.  See  also 
Scientific   management. 

Time-card  for  employes.  138. 

Time  standards :  for  handling  opera- 
tions, 178;  for  machine  operations, 
175. 

Time-study  and  Instruction  card,  102- 
103. 

Time-study  observation  sheet,  plate  be- 
tween 198  and  199,  198. 

Time  work.  212-14  ;  with  efficiency 
records.  220-21. 

Tool   committee,   0. 

Tool  list,  for  time  and  motion  studies, 
198. 

Tool  rooms.  56.  See  also  Plants  and 
equipment. 

Tools  :  selection  of.  by  a  committee,  6 ; 
standardization  in,  175-77.  See  also 
I'lants  and  equipment. 

Tracing  record,  showing  progress  of 
w-ork,  106. 

Trade  centers,  local,  a  factor  in  locat- 
ing an  Industry.  40. 

Transportation  facilities :  a  factor  in 
locating  an  Industrv,  34-36 ;  local, 
.•59-40. 

Transportation  industry.   11. 

Transportation,  within  the  plant,  50-55. 

Treasurer,   94. 

TTnion  men.  266-69.    See  also  Ijabor. 
U.  S.  Steel  Corporation,  safety  devices 
of,  plates  betwoon  242  and  243. 

Ventilating  a  plant,  52-.54 ;  through 
columns,  plate  between  242  and  243. 

Vocational  guidance,  aided  by  indus- 
trial surveys,  41. 

Wages  ;  bonus  system  of,  on  individual 
.1obs,  227-29 ;  collcctiove  contract 
work,  219-20;  contract  work,  214-20; 
Diemer  combined  bonus  and  premium 
system  of,  229-30  ;  cHlfcrential  piece 
rate  for,  216 ;  efficiency  system  of, 
230-31  ;  Gantt  bonus  system  of,  226- 


Index 


291 


27  ;  Halsey  premium  system  of,  221 
24;  ordinary  piece  rate  for,  214-16; 
pay-rate  not  cut  under  scientific  man- 
agement, 194,  215 ;  pay-roil  esti- 
mates, 277  ;  planning  for,  108  ;  Row- 
an premium  system  of.  224-26  ;  se- 
lecting and  introducing  wage  sys- 
tems, 231-34  ;  special  arrangement  of 
to  avoid  trouble  with  unions,  267-68  ; 
standardization  of.  179-80;  systems 
of  212-34;  time  work",  212-14;  time 
worlj  with  efficiency  records,  220-21. 
See  alfto  Organization. 

Wash  and  locker  rooms.  55. 

Waste,   disclosed   by  cost  system,   115. 

Water  supply,  a  factor  in  locating  an 
industiT,    40. 


Water  transportation,  an  aid  to  indus- 
try. 34-36. 

Welfare  and  betterment  work,  236-50 ; 
activities  Included  in,  237  ;  aims  of 
236  :  arrangements  for.  in  the  plant, 
57-58  ;  benefit  societies.  248-50  :  com- 
mittee on,  7 ;  educational  activities 
in.  243-44  :  insurance,  249 ;  medi- 
cal and  hygienic  activities.  246  ;  or- 
ganization of.  237-39  ;  physical  train- 
ing in,  246-47  ;  planned  for  by  em- 
ployment manager.  108  ;  rest  periods 
and  luncheons,  244-45 ;  safety,  acci- 
dent and  fire  prevention  in.  239  ;  so- 
cial activities,  245-46 ;  suggestion 
system,  247  ;  under  employment  man- 
ager, 108.    See  also  Organization. 

Works  manager,  23. 


UUSB   LIBRARY 


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